MAYBANK KIM ENG SECURITIES PTE. LTD.

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1 CIRCULAR DATED 30 JANUARY 2015 THIS CIRCULAR IS ISSUED BY HAFARY HOLDINGS LIMITED. THIS CIRCULAR IS IMPORTANT AS IT CONTAINS THE RECOMMENDATION OF THE DIRECTORS (AS DEFINED HEREIN) AND THE ADVICE OF TATA CAPITAL MARKETS PTE. LTD. TO THE DIRECTORS. THIS CIRCULAR REQUIRES YOUR IMMEDIATE ATTENTION AND YOU SHOULD READ IT CAREFULLY. If you are in any doubt in relation to this Circular or as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately. If you have sold or transferred all your issued ordinary shares in the capital of Hafary Holdings Limited, you should immediately forward this Circular to the purchaser, the transferee or the bank, stockbroker or agent through whom you effected the sale or transfer for onward transmission to the purchaser or the transferee. The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Circular. CIRCULAR TO SHAREHOLDERS In relation to the VOLUNTARY CONDITIONAL CASH PARTIAL OFFER by MAYBANK KIM ENG SECURITIES PTE. LTD. (Incorporated in the Republic of Singapore) (Company Registration No.: N) for and on behalf of HAP SENG INVESTMENT HOLDINGS PTE. LTD. (Incorporated in the Republic of Singapore) (Company Registration No.: E) a direct wholly-owned subsidiary of HAP SENG CONSOLIDATED BERHAD (Incorporated in Malaysia) (Company No.: W) to acquire 218,790,000 of the ordinary shares in the capital of Hafary Holdings Limited other than the shares held in treasury and shares already owned, controlled or agreed to be acquired by Hap Seng Investment Holdings Pte. Ltd. and its Concert Parties (as defined herein) Independent Financial Adviser to the Directors (Incorporated in the Republic of Singapore) (Company Registration No.: M) SHAREHOLDERS SHOULD NOTE THAT THE OFFER DOCUMENT (AS DEFINED HEREIN) STATES THAT THE ACCEPTANCE AND APPROVAL OF THE OFFER (AS DEFINED HEREIN) SHOULD BE RECEIVED BY THE OFFEROR (AS DEFINED HEREIN) BY 5.30 P.M. (SINGAPORE TIME) ON 13 FEBRUARY ACCORDINGLY, SHAREHOLDERS WHO WISH TO ACCEPT AND APPROVE THE OFFER MUST DO SO BY SUCH TIME AND DATE.

2 CONTENTS DEFINITIONS... 1 CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS... 5 CORPORATE INFORMATION... 6 INDICATIVE TIMELINE... 7 LETTER TO SHAREHOLDERS INTRODUCTION THE OFFER INFORMATION ON THE OFFEROR AND HSCB RATIONALE FOR THE OFFER AND THE OFFEROR S INTENTIONS RELATING TO THE COMPANY IRREVOCABLE UNDERTAKINGS DIRECTORS INTERESTS AND INTENTIONS ADVICE OF THE IFA RECOMMENDATION OF THE DIRECTORS OVERSEAS SHAREHOLDERS ACTION TO BE TAKEN BY THE RELEVANT SHAREHOLDERS INFORMATION PERTAINING TO CPFIS INVESTORS RESPONSIBILITY STATEMENT ADDITIONAL INFORMATION LETTER FROM THE IFA TO THE DIRECTORS APPENDICES GENERAL INFORMATION ADDITIONAL INFORMATION ON THE OFFEROR AND HSCB AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY VALUATION SUMMARY LETTERS AND VALUATION CERTIFICATES Page

3 DEFINITIONS Except where the context otherwise requires, the following definitions apply throughout this Circular: Act : The Companies Act (Cap. 50) of Singapore. Annual Report : The annual report of the Company. Appointee : Has the meaning given to it in Section 5.1 of Appendix 1 to this Circular. Articles : The Articles of Association or other regulations of the Company for the time being in force as originally framed, or as from time to time altered by special resolution. Audited FY2014 Results : Has the meaning given to it in Section 6.1 of Appendix 1 to this Circular. Auditors : The auditors for the time being of the Company. CDP : The Central Depository (Pte) Limited, or any other corporation approved by the Minister as a depository company or corporation for the purposes of the Act, which as a bare trustee operates the Central Depository System for the holding and transfer of book-entry securities, or such other meaning as may be ascribed by the Act from time to time. Circular : This circular to Shareholders dated 30 January 2015 in relation to the Offer. Closing Date : 5.30 p.m. (Singapore time) on 13 February Code : The Singapore Code on Take-overs and Mergers. Company or Hafary : Hafary Holdings Limited. Company Shareholders : Has the meaning given to it in Section 2.1.6(a) of this Circular. Resolution Competing Offer : Has the meaning given to it in Section of this Circular. Concert Parties : Parties acting in concert with the Offeror in relation to Offer. CPF : Central Provident Fund. CPF Agent Banks : Agent banks included under the CPFIS. CPFIS : Central Provident Fund Investment Scheme. CPFIS Investors : Investors who have purchased Shares using their CPF contributions pursuant to the CPFIS. Deemed Interest : Interests in securities not legally but beneficially owned. Directors : The directors of the Company as at the Latest Practicable Date. FAA : Form of Acceptance and Authorisation, which forms part of the Offer Document and which is issued to Shareholders whose Shares are deposited with CDP. 1

4 FAT : Form of Acceptance and Transfer, which forms part of the Offer Document and which is issued to Shareholders whose Shares are deposited with CDP. FY2012 : Financial year ended 30 June FY2013 : Financial year ended 30 June FY2014 : Financial year ended 30 June Group : The Company, its subsidiaries and its associated companies. Hafary Performance Share Plan : The Hafary Performance Share Plan, which was approved by the Shareholders at the annual general meeting of the Company held on 25 October HSCB : Hap Seng Consolidated Berhad, which wholly-owns the Offeror. IFA : The independent financial adviser to the Directors in connection with the Offer. IFA Letter : Has the meaning given to it in Section 7.1 of this Circular. Irrevocable Undertaking : Irrevocable undertaking to accept and approve the Offer, as more particularly described in Section 5.1 of this Circular. Latest Practicable Date : 20 January 2015, being the latest practicable date prior to the printing of this Circular. Listing Manual : The mainboard listing manual of the SGX-ST. Market Day : A day on which the SGX-ST is open for trading in securities. MKES : Maybank Kim Eng Securities Pte. Ltd., the financial adviser to the Offeror in connection with the Offer. Offer : The voluntary conditional cash partial offer by MKES, for and on behalf of the Offeror, to acquire the Offer Shares on the terms set out in the Offer Document, the FAA and the FAT or on such revised terms, if any, as may be announced from time to time by or on behalf of the Offeror in accordance with the Code. Offer Announcement : The announcement of the Offer released by MKES, for and on behalf of the Offeror, on the Offer Announcement Date on the SGXNet. Offer Announcement Date : 30 December 2014, being the date of release of the Offer Announcement on the SGXNet. Offer Document : The offer document dated 16 January 2015 issued by MKES, for and on behalf of the Offeror, and any other document(s) which may be issued, for and on behalf of the Offeror, to amend, revise, supplement or update the Offer Document and such other document(s) from time to time. Offer Period : The period from the Offer Announcement Date until the date the Offer is declared to have closed or lapsed. Offer Price : S$0.24 in cash for each Offer Share or such revised price, if any, as may be announced from time to time by or on behalf of the Offeror in accordance with the Code. 2

5 Offer Shares : 218,790,000 Shares to which the Offer relates, representing 51 per cent. of the issued share capital of the Company as at the Latest Practicable Date. Offer Unconditional : Shall have the meaning given to it in Section of this Announcement Circular. Offeror : Hap Seng Investment Holdings Pte. Ltd. Opposing Proposal : Any general offer for the Company s ordinary shares or any class of its shares from any third party or any proposal for a merger of the Company with any other entity or any proposal for the acquisition of the assets of the Company which are otherwise in the ordinary course of business during the Offer. Overseas Shareholders : Has the meaning given to it in Section 9.1 of this Circular. PBT : Has the meaning given to it in Section 5.1(c) of Appendix 1 to this Circular. Properties : The properties at (i) 105 Eunos Avenue 3 Hafary Centre Singapore , (ii) 3 Changi North Street 1 Singapore , (iii) 54/ 56 Sungei Kadut Loop Singapore , (iv) 18C Sungei Kadut Street 4 Singapore , (v) 18 Sungei Kadut Street 2 Singapore , and (vi) North Fangxun Road, Hecheng Jiedao (Fuwan), Gaoming District, Foshan, Guangzhou Province, The People s Republic of China, in which the Company has interests and which have been valued as at 30 September 2014 pursuant to the Valuation Summary Letters and Valuation Certificates set out in Appendix 4 to this Circular. Record Date : 5.00 p.m. (Singapore time) on 30 January 2015, being the date on which the Share Register and the Depository Register will be closed in order to determine the entitlements of Shareholders to accept and approve the Offer. Relevant Shares : The total number of Shares in issue which are not already owned, controlled or agreed to be acquired by the Offeror and its concert parties. Relevant Shareholders : All shareholders of the Company as at the Record Date, other than the Offeror and parties acting in concert with it. Securities Account : The securities account maintained by a depositor with CDP but not including a securities sub-account. Service Agreement : Has the meaning given to it in Section 5.1 of Appendix 1 to this Circular. SFA : The Securities and Futures Act (Cap. 289) of Singapore. SGXNet : The SGX online portal for corporate actions and company announcements. SGX-ST : Singapore Exchange Securities Trading Limited. Shares : Ordinary shares in the issued share capital of the Company. Share Register : The Register of Members (or Shareholders) of the Company, as maintained by the Share Registrar. 3

6 Share Registrar : Boardroom Corporate & Advisory Services Pte. Ltd. Shareholders : Holders of Shares in issue (including persons whose Shares are deposited with CDP). SIC : Securities Industry Council of Singapore. TCMPL : Tata Capital Markets Pte. Ltd., the IFA. Undertaken Shares : Has the meaning given to it in Section 5.1(a) of this Circular. Undertaking Shareholders : Persons from whom Irrevocable Undertakings have been received, as shown in Section of this Circular. Valuation Summary Letters and : The valuation summary letters and valuation certificates in Valuation Certificates relation to the Properties issued by the Valuers as set out in Appendix 4 to this Circular. Valuers : Knight Frank Pte Ltd and Knight Frank Petty Limited. Voting Shares : Has the meaning given to it in Section 5.1(b) of this Circular. S$ and cents : Singapore dollars and cents, respectively, being the lawful currency of Singapore. % or per cent. : Percentage or per centum. Acting in Concert, Associated Company. Unless otherwise defined, the expression acting in concert and associates shall have the same meanings given to them respectively in the Code. Depositors, etc. The expressions Depositor and Depository Register shall have the meanings ascribed to them respectively in the Act. Genders. Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall, where applicable, include corporations. Headings. The headings in this Circular are inserted for convenience only and shall be ignored in construing this Circular. Rounding. Any discrepancies in the tables in this Circular between the listed amounts and the totals thereof are due to rounding. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures that precede them. Shareholders. References to you, your and yours in this Circular are, as the context so determines, to Shareholders. Shares in the Capital of the Company. In this Circular, the total number of Shares is 429,000,000 as at the Latest Practicable Date. As at the Latest Practicable Date, the Company does not have any treasury shares. Subsidiary. The expression subsidiary shall have the meaning given to it in the Act. Statutes. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Act, the Code, the Listing Manual, the SFA or any modification thereof and used in this Circular shall, where applicable, have the meaning assigned to that word under the Act, the Code, the Listing Manual, the SFA or that modification, as the case may be. Time, Date. Any reference to a time of day and date in this Circular shall be a reference to Singapore time and date, unless otherwise specified. Offer Document definitions. Capitalised terms used in extracts of the Offer Document shall have the same meanings as ascribed to them in the Offer Document. 4

7 CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS All statements other than statements of historical facts included in this Circular are or may be forwardlooking statements. Forward-looking statements include but are not limited to those using words such as expect, anticipate, believe, intend, project, plan, strategy, forecast and similar expressions or future or conditional verbs such as will, would, should, could, may and might. These statements reflect the Company s current expectations, beliefs, hopes, intentions or strategies regarding the future and assumptions in light of currently available information. Such forward-looking statements are not guarantees of future performance or events and involve known and unknown risks and uncertainties. Accordingly, actual results or outcomes may differ materially from those described in such forwardlooking statements. Shareholders and investors should not place undue reliance on such forward-looking statements, and neither the Company nor the IFA undertakes any obligation to update publicly or revise any forward-looking statements, subject to compliance with all applicable laws and regulations and/or rules of the SGX-ST and/or any other regulatory or supervisory body or agency. 5

8 CORPORATE INFORMATION Board of Directors : Mr. Low Kok Ann Mr. Low See Ching Mr. Ong Beng Chye Mr. Terrance Tan Kong Hwa Mr. Chow Wen Kwan Marcus Company Secretary : Mr. Tay Eng Kiat Jackson Registered Office : 105 Eunos Avenue 3 Hafary Centre Singapore Share Registrar : Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore Independent Financial Adviser : Tata Capital Markets Pte. Ltd. to the Directors in relation to 80 Robinson Road the Offer #02-00 Singapore Legal Adviser to the : TSMP Law Corporation Company in relation to 6 Battery Road the Offer Level 41 Singapore Auditors of the Company : RSM Chio Lim LLP 8 Wilkie Road #03-08 Wilkie Edge Singapore Audit Partner-in-charge: Ms. Woo E-Sah 6

9 INDICATIVE TIMELINE Date of despatch of Offer Document : 16 January 2015 Date of despatch of this Circular : 30 January 2015 Record Date : 5.00 p.m. (Singapore time) on 30 January 2015 Despatch of EntitlementNotification : On or about 4 February 2015 Letter (as defined in the Offer Document) Closing Date : 5.30 p.m. (Singapore time) on 13 February 2015 Payment of Offer Price : Subject to the Offer becoming or being declared unconditional in all respects (and in this connection, the Offer has become and was declared unconditional in all respects), within 10 calendar days of the Closing Date 7

10 LETTER TO SHAREHOLDERS HAFARY HOLDINGS LIMITED (Company Registration No C) (Incorporated in the Republic of Singapore) Directors: Registered Office: Mr. Low Kok Ann 105 Eunos Avenue 3 Mr. Low See Ching Hafary Centre Mr. Ong Beng Chye Singapore Mr. Terrance Tan Kong Hwa Mr. Chow Wen Kwan Marcus 30 January 2015 To: The Shareholders of Hafary Holdings Limited Dear Sir/Madam VOLUNTARY CONDITIONAL CASH PARTIAL OFFER 1. INTRODUCTION 1.1 Offer Announcement. On 30 December 2014, MKES announced, for and on behalf of the Offeror, inter alia, that in accordance with Rule 16 of the Code, the Offeror intends to make the Offer. An announcement in relation to the Offer was then made by the Company on the same day following the Offer Announcement. Copies of the announcements referred in this Section 1.1 are available on the website of the SGX- ST at Offer Document. Shareholders should by now have received a copy of the Offer Document issued by MKES, for and on behalf of the Offeror, setting out, inter alia, the terms and conditions of the Offer. Shareholders are advised to read the terms and conditions of the Offer contained therein carefully. A copy of the Offer Document is available on the website of the SGX-ST at IFA. The Company has appointed TCMPL as the independent financial adviser to advise the Directors in respect of the Offer. 1.4 Circular. The purpose of this Circular is to provide Shareholders with relevant information pertaining to the Company and to set out the recommendation of the Directors and the advice of the IFA to the Directors in respect of the Offer. Shareholders should read the Offer Document, this Circular and the IFA Letter carefully and consider the recommendation of the Directors and the advice of the IFA to the Directors in respect of the Offer before deciding whether or not to accept the Offer. 2. THE OFFER 2.1 Offer Terms and Conditions. As set out in the Offer Document, the Offer is made on the following terms and conditions: 8

11 2.1.1 Offer Shares: The Offer is made to acquire 218,790,000 Offer Shares, other than: (a) (b) Shares held in treasury there are no treasury Shares as at the Latest Practicable Date; and Shares already owned, controlled or agreed to be acquired by the Offeror and its Concert Parties. The Offer Shares represent 51 per cent. of the issued share capital of the Company as at the Latest Practicable Date. As at the Latest Practicable Date, the Offeror does not own or control, and has not agreed to acquire, any Shares or securities, which carry voting rights in the Company, or rights to subscribe for or options in respect of Shares or such securities. As at the Latest Practicable Date, the Offeror has received Irrevocable Undertakings (i) to accept the Offer in respect of 219,580,500 Shares in aggregate, representing approximately per cent. 1 of the Shares in the issued share capital of the Company, and (ii) to approve the Offer in respect of 314,904,000 Shares in aggregate, representing approximately per cent. of the Shares in the issued share capital of the Company. Accordingly, as the Offer is made to acquire 218,790,000 Shares, upon the Undertaking Shareholders tendering the Shares covered by their respective Irrevocable Undertakings in acceptance of the Offer, the Offer will become and be declared unconditional as to acceptances. If the Offer becomes or is declared unconditional in all respects, and assuming no new or treasury share is issued or transferred between the Latest Practicable Date and the close of the Offer, the Offeror would acquire 51 per cent. (218,790,000 Shares) of the Shares in the issued share capital of the Company as at the close of the Offer. The Offeror and its Concert Parties will be able to exercise statutory control over the Company and will be free, subject to a six-month moratorium after the close of the Offer, to acquire further Shares without incurring any obligation to make a general take-over offer for the Company Relevant Shareholders: The Offer will be made to all Relevant Shareholders. As prescribed by the Code, the Record Date on which the Share Register and the Depository Register is to be closed to determine the entitlements of Shareholders to accept and approve the Offer will be the 14 th day 2 before the Closing Date. It is the Shareholders (not being the Offeror and its Concert Parties) as at the Record Date who are entitled to participate in the Offer and their entitlements will be determined in proportion to the number of Shares held by them as at the Record Date. Such entitlements are not transferable. Each Relevant Shareholder may only accept and approve the Offer in respect of the number of Shares held by it as at the Record Date. If any Relevant Shareholder acquires any additional Shares after the Record Date but does not sell any of the Shares held by it as at the Record Date, it will not be entitled to accept or approve the Offer in respect of any of those additional Shares. If any person becomes a Shareholder after the Record Date, it will not be eligible to participate in the Offer as a Relevant Shareholder it will not be entitled to accept or approve the Offer in respect of any Shares held by it. Further information on the entitlement of Relevant Shareholders to vote on and accept the Offer is set out in Appendix 2 to the Offer Document. 1 Any reference to percentage shareholdings in this Circular is computed based on 429,000,000 Shares in issue (excluding treasury shares) as at the Latest Practicable Date. 2 Or, if such day falls on a non-business day, the next immediately following business day. 9

12 2.1.3 Hafary Performance Share Plan: As at the Latest Practicable Date, the Company has granted an aggregate of 1,550,000 Shares which have been awarded but not yet allotted to participants of the Hafary Performance Share Plan. The terms of the Hafary Performance Share Plan provide that prior to the allotment of such Shares to which the award relates, such grants of awards are not transferable except with the prior approval of the committee administering the Hafary Performance Share Plan. Accordingly, the Offer will not be extended to participants of the Hafary Performance Share Plan to whom such awards have been granted but the Shares of which have not been allotted. The Offer will however be extended, on the same terms and conditions, to all new Shares which have been allotted and issued pursuant to the vesting of Shares under the Hafary Performance Share Plan prior to the Record Date. For the purposes of the Offer, the expression Offer Shares shall include all such new Shares Offer Price: The Offer will be made at S$0.24 in cash for each Offer Share. The Offeror has no intention to revise the Offer Price of S$0.24, save that the Offeror reserves the right to revise the terms of the Offer in accordance with the Code if an offer which is, or is deemed under the Code to be, competitive to the Offer (a Competing Offer ) arises. Accordingly, unless otherwise announced by or on behalf of the Offeror in the event of a Competing Offer, the Offer Price is final and will not be revised Rights and Encumbrances: The Offer Shares will be acquired (i) fully paid, (ii) free from all liens, equities, mortgages, charges, encumbrances, rights of pre-emption and other third party rights or interests of any nature whatsoever, and (iii) together with all rights, benefits and entitlements attached thereto as at the Offer Announcement Date and thereafter attaching thereto, including the right to receive and retain all dividends, other distributions and return of capital (if any) which may be announced, declared, paid or made by the Company on or after the Offer Announcement Date. Any Relevant Shareholder who tenders its Shares in acceptance of the Offer will be deemed to have unconditionally and irrevocably warranted that it sells such Shares as or on behalf of the beneficial owner(s) thereof in the terms set out in Sections 2.1.5(i) to (iii) of this Circular above. If any dividend, other distribution or return of capital is announced, declared, paid or made by the Company on or after the Offer Announcement Date, the Offeror reserves the right to reduce the Offer Price by the amount of such dividend, other distribution or return of capital Offer Conditions: The Offer will be subject to the following conditions: (a) (b) the Offeror having received, by the close of the Offer, approval of the Offer by the Relevant Shareholders representing more than 50 per cent. of the valid votes received from Relevant Shareholders (the Offeror, its Concert Parties and their associates not being allowed to vote) (the Company Shareholders Resolution ); and the Offeror having received, by the close of the Offer, valid acceptances in respect of 51 per cent. Offer Shares which, when taken together with the Shares owned, controlled or agreed to be acquired by the Offeror and its Concert Parties, will result in the Offeror and its Concert Parties holding 51 per cent. of the total number of Shares outstanding as at the close of the Offer. Accordingly, as noted in Section above, as the Offer is made to acquire 51 per cent. Shares, upon the Undertaking Shareholders tendering the Shares covered by their respective Irrevocable Undertakings in acceptance of the Offer, the Offer will become and be declared unconditional as to acceptances. The Offer will be unconditional in all other respects. On 20 January 2015, MKES, for and on behalf of the Offeror, announced ( Offer Unconditional Announcement ) that the Offeror had on the same day received valid acceptances of the Offer in respect of 239,680,500 Shares, representing approximately per cent. of the Shares in the 10

13 issued share capital of the Company. The Offeror had also received votes in favour of the Offer in respect of 314,904,000 Shares, representing approximately per cent. of Shares in the issued share capital of the Company. Accordingly, the Offer has become and was declared unconditional in all respects as at 5.00 p.m. (Singapore time) on 20 January SIC Approval. The full text in relation to the SIC s grant of consent to the Offeror to the making of the Offer as set out in Section 3 of the Offer Document has been extracted from the Offer Document and reproduced in italics below. Unless otherwise stated, all terms and expressions used in the extract below shall have the meanings given to them in the Offer Document. 3. SIC APPROVAL 3.1 On 8 December 2014, the SIC granted its consent to the making of the Partial Offer, subject to the applicable conditions under Rule 16.4 of the Code. 3.2 The applicable requirements of Rule 16.4 of the Code are as follows: the Partial Offer is not a mandatory offer under Rule 14 of the Code; the Offeror confirms and undertakes in its application for consent that it and its concert parties did not and will not acquire any voting shares (excluding voting shares acquired by the Offeror and its concert parties via a rights issue and/or bonus issue without increasing their aggregate percentage shareholdings) in the Company: (i) (ii) (iii) (iv) in the six months prior to the Offer Announcement Date (and confirms this fact in the Offer Announcement); in the period between submitting the application for the SIC s consent and the making of the Partial Offer; during the offer period (except pursuant to the Partial Offer); and during a period of six months after the Closing Date, if the Partial Offer becomes unconditional as to acceptances; the Partial Offer is conditional, not only on the specified number or percentage of acceptances being received, but also on approval by the Shareholders. The Offeror, parties acting in concert with it and their associates are not allowed to vote on the Partial Offer. Voting should be: (i) (ii) if a general meeting is convened, by way of a poll on a separate ordinary resolution on the Partial Offer. The Partial Offer must be approved by Shareholders (present and voting either in person or by proxy) of more than 50 per cent. of the votes cast; or if it is on the form of acceptance for the Partial Offer, in a separate box with the number of voting shares indicated. The Partial Offer must be approved by Shareholders of more than 50 per cent. of the votes received. Upon the close of the Partial Offer, the receiving agent must confirm in writing to the SIC that it has done the necessary checks and verification to ensure that votes (if any) cast by Shareholders not allowed to vote, are disregarded and excluded for the purpose of determining shareholders approval for the Partial Offer; 3 If the 1,550,000 Shares awarded under the Hafary Performance Share Plan are allotted and issued, valid votes received by the Offeror as at 5.00 p.m. (Singapore time) on 20 January 2015 will represent per cent. of the total enlarged share capital of the Company. 11

14 3.2.4 arrangements are made with the SGX-ST prior to the posting of the Offer Document to provide a temporary trading counter to trade odd-lots in the Shares after the close of the Partial Offer. Such counter should be open for a reasonable period of time, which in any case should not be shorter than one month; the Offer Document contains a specific and prominent statement to the effect that if the Partial Offer succeeds, the Offeror will be able to exercise statutory control over the Company and that the Offeror and its concert parties will be free, subject to the six-month period in Section 3.2.2(iv) above, to acquire further shares without incurring any obligation to make a general offer; the Partial Offer is made to all Shareholders of the class and arrangements are made for those Shareholders who wish to accept in full for the relevant percentage of their holdings. Shares tendered in excess of this percentage should be accepted by the Offeror from each Shareholder in the same proportion as the number tendered to the extent necessary to enable the Offeror to obtain the relevant number of Offer Shares. The Offeror should arrange its acceptance procedure to minimise the number of new odd-lot shareholdings; if the Company has more than one class of equity share capital, a comparable offer is made for each other class; an appropriate Partial Offer is made for outstanding instruments convertible into, rights to subscribe for, and options in respect of, securities which carry voting rights. In addition, the Partial Offer must be extended to holders of newly issued Shares arising from the exercise of such instruments, subscription rights or options during the offer period; and the precise number of Shares, percentage or proportion offered is stated, and the offer may not be declared unconditional as to acceptances unless acceptances are received for not less than that number, percentage or proportion. 3.3 In connection with the condition set out in Section of this Offer Document, the Offeror has confirmed and provided the relevant undertaking to the SIC. 2.2 No Other Class of Shares or Convertible Securities. As at the Latest Practicable Date, the Company: (a) (b) has only one class of shares in issue the Shares; and save for the Hafary Share Performance Plan, has not issued any rights, options, warrants or other securities which are convertible, exercisable or redeemable into, for or with any Shares or other class of shares which remains outstanding. Accordingly, no comparable offer needs to be made for any other class of shares in the capital of the Company. 2.3 Closing Date. Shareholders should note that the Offer will close at 5.30 p.m. (Singapore time) on 13 February Further Details. Further details on the Offer, including in relation to (a) the duration of the Offer, (b) the right to revise the Offer, (c) the settlement of the consideration for the Offer, (d) the requirements relating to the announcement of the level of acceptances of the Offer, and (e) the right of withdrawal of acceptances are set out in Appendix 1 to the Offer Document. 12

15 3. INFORMATION ON THE OFFEROR AND HSCB 3.1 Information on the Offeror. Information on the Offeror as set out in Section 2 of Appendix 3 to the Offer Document is reproduced in italics below. 2. PRINCIPAL ACTIVITIES The Offeror is a company incorporated in Singapore on 24 November 2014 and its principal activity is that of an investment holding company. It has an issued and paid-up share capital of S$1.00 comprising one ordinary share. It is a direct wholly-owned subsidiary of HSCB. 3.2 Information on HSCB. Information on HSCB as set out in Section 2 of Appendix 4 to the Offer Document is reproduced in italics below. 2. PRINCIPAL ACTIVITIES HSCB is a company incorporated in Malaysia and listed on the Main Board of Bursa Malaysia Securities Berhad with diversified businesses in plantations, property investment and development, credit financing, trading of fertilizers and automotive, as well as building materials and stone quarries. 3.3 Further Information. Appendix 3 and Appendix 4 to the Offer Document set out further information on the Offeror and HSCB respectively, which is reproduced in Appendix 2 to this Circular. 4. RATIONALE FOR THE OFFER AND THE OFFEROR S INTENTIONS RELATING TO THE COMPANY The full text of the rationale for the Offer and the Offeror s intentions relating to the Company set out in Section 12 and Section 13 respectively of the Offer Document has been extracted from the Offer Document and reproduced in italics below. 12. RATIONALE FOR THE PARTIAL OFFER 12.1 HSCB, through the Offeror, is seeking to acquire a controlling interest in the Company as the Company would be complementary to HSCB s existing involvement in the building materials upstream market segment and a business combination between the Company and HSCB is expected to create strong synergistic benefits for the following reasons: HSCB is involved in upstream segment of the building materials market while the Company is a strong downstream candidate, being a distributor of internationallyacclaimed brands and having a diversified customer portfolio and an established and extensive distribution network; and the Company can facilitate HSCB s regional expansion to develop an integrated building materials business, having regard to (a) the Company being a market leader in the tiles segment in the Singapore market and (b) potential growth catalyst in the Company through emerging market presence in Vietnam and China. 13. THE OFFEROR S INTENTIONS FOR THE COMPANY 13.1 The Offeror s Future Plans for the Company. It is the intention of the Offeror to carry on and expand the existing business of the Company, and the Offeror presently has no intention to (i) introduce any major changes to the business of the Company, (ii) re-deploy the fixed assets of the Company or (iii) discontinue the employment of the employees of the Company, save in the ordinary course of the business. However, the Offeror retains the flexibility at any time to consider any options in relation to the Company which may present themselves and which the Offeror may regard to be in the interest of the Company. 13

16 13.2 Listing Status Listing Status of the Company. Under Rule 1105 of the Listing Manual, in the event that the Offeror and parties acting in concert with the Offeror should, as a result of the Partial Offer or otherwise, own or control more than 90 per cent. of the Shares (excluding treasury shares), the SGX-ST may suspend the trading of the Shares on the SGX-ST until such time when the SGX-ST is satisfied that at least 10 per cent. of the Shares (excluding treasury shares) are held by at least 500 Shareholders who are members of the public. In addition, under Rule 724(1) of the Listing Manual, if the percentage of the Shares (excluding treasury shares) held in public hands falls below 10 per cent., the Company must, as soon as possible, announce that fact and the SGX-ST may suspend trading of all the Shares on the SGX-ST. Pursuant to Rule 724(2) of the Listing Manual, the SGX-ST may allow the Company a period of three months, or such longer period as the SGX-ST may agree, to raise the percentage of Shares held by members of the public to at least 10 per cent., failing which the Company may be de-listed from the SGX-ST. As the Partial Offer is made for the Offer Shares, which, if successful will result in the Offeror and parties acting in concert with the Offeror holding 51 per cent. of the Shares in issue as at the Closing Date, the Offeror and parties acting in concert with the Offeror will not, as a result of the Partial Offer, own, control or acquire more than 90 per cent. of the Shares. Accordingly, Rules 1105 and 724(1) of the Listing Manual will not be invoked solely as a result of the Partial Offer Intention of the Offeror. It is the current intention of the Offeror to acquire a controlling shareholding interest in the Company and to maintain the listing status of the Company on the SGX-ST following completion of the Partial Offer No Compulsory Acquisition. Pursuant to Section 215(1) of the Companies Act, if the Offeror receives acceptances pursuant to the Partial Offer in respect of not less than 90 per cent. of the Shares in issue (other than those already held by the Offeror, its related corporations or their respective nominees as at the Record Date), the Offeror will have the right to compulsorily acquire at the Offer Price, all the Shares of the Shareholders who have not accepted the Partial Offer. Similarly, pursuant to Section 215(3) of the Companies Act, if the Offeror acquires such number of Shares which, together with Shares held by it, comprise not less than 90 per cent. of the Shares, Shareholders who have not accepted the Partial Offer will have the right to require the Offeror to acquire their Shares at the Offer Price. However, as the Partial Offer is made for the Offer Shares which, if successful, will result in the Offeror and parties acting in concert with it holding 51 per cent. of the Shares in issue as at the Closing Date, the Offeror and parties acting in concert with it will not, as a result of the Partial Offer, acquire 90 per cent. or more of the Shares in issue (other than those already held by the Offeror, its related corporations or their respective nominees as at the Record Date). Accordingly the aforesaid rights of compulsory acquisition will not arise as a result of the Partial Offer. 5. IRREVOCABLE UNDERTAKINGS 5.1 Obligations of the Undertaking Shareholders. As stated in Section 4.1 of the Offer Document, as at the last practicable date of the Offer Document, each of the Undertaking Shareholders has given an irrevocable undertaking to the Offeror to, inter alia: (a) accept and to procure the acceptance of, the Offer in respect of all of the specified number of Shares held or beneficially owned by the Undertaking Shareholders (the Undertaken Shares ); and 14

17 (b) exercise all voting rights attaching to all Shares in which the Undertaking Shareholders are the registered holder, beneficial owner or have an interest in, including the Undertaken Shares (collectively, the Voting Shares ), and any other Shares of which they may hereafter become such registered holder, beneficial owner or in which they may become so interested in such manner as to enable the Offer to be made and become unconditional, including to vote all such Undertaken Shares in favour of the Company Shareholders Resolution. Pursuant to the terms of the Irrevocable Undertakings, the Undertaking Shareholders are required to tender the Undertaken Shares in acceptance of the Offer not later than 3.00 p.m. (Singapore time) on the third business day after the despatch date of the Offer Document Undertaken Shares. As stated in Section of the Offer Document, as at the latest practicable date of the Offer Document, the aggregate number of Undertaken Shares which are the subject of the Irrevocable Undertakings amount to 219,580,500 Shares, representing approximately per cent. of the total number of Shares in issue. As set out in Section of the Offer Document, the details of the number of Undertaken Shares which are the subject of the Irrevocable Undertakings as at the latest practicable date of the Offer Document are as follows: Direct Interest Deemed Interest Number of Number of Undertaking Shareholders Shares % Shares % Mr. Low Kok Ann 4 34,080, Mr. Low See Ching 30,600, ,095, Dr. Low Bee Lan Audrey 41,104, Mr. Ching Chiat Kwong 21,000, ,700, Total for Undertaking Shareholders 126,784, ,795, Voting Shares. As set out in Section of the Offer Document, as at the latest practicable date of the Offer Document, the aggregate number of Voting Shares which are the subject of the Irrevocable Undertakings amounts to 314,904,000 Shares, representing approximately per cent. of the Shares of the total number of Shares in issue Termination. As stated in Section 4.3 of the Offer Document, the obligations of the Undertaking Shareholders under the Irrevocable Undertakings shall lapse if: (a) (b) (c) the Offer Announcement is not released within five business days from the date of the signing of the Irrevocable Undertakings; the Offer is not made (by the posting of the Offer Document) within the time period prescribed in the Code; or the Offer lapses or is withdrawn without having become wholly unconditional. 4 Mr. Low Kok Ann is the father of Mr. Low See Ching and Dr. Low Bee Lan Audrey. 5 Held in the name of Bank of Singapore Nominees Pte Ltd. 6 15,640,000 shares are held in the name of Bank of Singapore Nominees Pte Ltd, 1,060,000 shares are held in the name of OCBC Securities Private Limited and 45,000,000 shares are held in the name of DB Nominees (S) Pte Ltd. These figures have been updated since the date of the Offer Document. 15

18 5.2 No Other Undertaking. As stated in Section 4.4 of the Offer Document, save as disclosed in the Offer Document, neither the Offeror nor parties acting in concert with the Offeror has received any irrevocable undertaking from any party (including any party acting in concert with the Offeror) to accept or reject the Offer as at the latest practicable date of the Offer Document. 5.3 Level of Acceptances and Approval. The following information on the level of acceptances and approval has been extracted from paragraph 3 and paragraph 4 respectively of the Offer Unconditional Announcement and reproduced in italics below. Unless otherwise stated, all terms and expressions used in the extract below shall have the meanings given to them in the Offer Unconditional Announcement. 3. LEVEL OF ACCEPTANCES OF THE PARTIAL OFFER Pursuant to Rule 28.1 of the Singapore Code on Take-overs and Mergers (the Code ), the Offeror wishes to announce that as at 5.00 p.m. (Singapore time) on 20 January 2015, the total number of Shares (i) held before the offer period, (ii) acquired or agreed to be acquired during the offer period and (iii) for which valid acceptances of the Partial Offer have been received, are as follows: Percentage of Number of the issued Shares Shares (%) 1 Shares held by the Offeror and parties acting in concert with it prior to the offer period, being the period commencing from the release of the Offer Announcement on 30 December 2014 (the Offer Announcement Date ) Shares acquired or agreed to be acquired by the Offeror and parties acting in concert with it (other than pursuant to valid acceptances of the Partial Offer) as at the Offer Announcement Date up to 5.00 p.m. (Singapore time) on 20 January 2015 Valid acceptances of the Partial Offer received by the Offeror as at 5.00 p.m. (Singapore time) on 20 January ,680, Total 239,680, Notes: 1 Unless otherwise stated, references in this Announcement to percentages or total number of Shares are based on a total of 429,000,000 Shares as at 8 January 2015 (being the latest practicable date prior to the printing of the Offer Document) (the "Latest Practicable Date") according to the information provided by the Company to the Offeror in accordance with the Code. 2 Does not take into account Shares acquired by and disposed of by Tan Siew Fong, who is the spouse of Mr Lee Wee Yong, a director of Hap Seng Consolidated Berhad, prior to the Offer Announcement Date. As set out in the Offer Document, the Offeror was informed after the release of the Offer Announcement that Tan Siew Fong had dealt in Shares during the period from 30 June 2014 (being the six-month period immediately preceding the Offer Announcement Date) and ending on the Latest Practicable Date (the "Reference Period"). The Offeror was not aware of such dealings prior to it being so informed. The Offeror has notified the SIC of the dealings in Shares by Tan Siew Fong during the Reference Period and is seeking approval from the SIC that, inter alia, such dealings may be disregarded for the purposes of Rule 16 of the Code for the Partial Offer. The Offeror will make the relevant announcement(s), if required, in due course. Please refer to Appendix 8 to the Offer Document for more information on the dealings in Shares by Tan Siew Fong. 3 Comprising both Relevant Percentage Offer Shares and Excess Shares. 4 If the 1,550,000 Shares awarded under the Hafary Performance Share Plan are allotted and issued, valid acceptances received by the Offeror as at 5.00 p.m. (Singapore time) on 20 January 2015 will represent per cent. of the total enlarged share capital of the Company. 5 Any discrepancies in the figures included in this Announcement between the amounts shown and the totals thereof are due to rounding. Accordingly, figures shown as totals in this Announcement may not be an arithmetic aggregation of the figures that precede them. 16

19 4. LEVEL OF APPROVAL OF THE PARTIAL OFFER As at 5.00 p.m. (Singapore time) on 20 January 2015, the Offeror has received votes in favour of the Partial Offer in respect of 314,904,000 Shares, representing approximately 100 per cent. of the votes received from Relevant Shareholders (excluding the Offeror, parties acting in concert with it and their respective associates) and approximately per cent. of the existing total issued share capital of the Company. Accordingly, on 20 January 2015, as stated in the Offer Unconditional Announcement, the Offer has become unconditional as to acceptances and approvals and was declared unconditional in all respects. 6. DIRECTORS INTERESTS AND INTENTIONS 6.1 Interests in Offer Shares. Details of the Directors, including inter alia, the Directors direct and deemed interests in the Offer Shares as at the Latest Practicable Date, are set out in Appendix 1 to this Circular. 6.2 Intentions with regard to the Offer. Directors who are also Relevant Shareholders have indicated their intention in respect of voting and/or accepting or declining the Offer in respect of their respective holdings of Shares as at the Latest Practicable Date, as follows: Voting Shares Undertaken Shares Name Direct Interest Deemed Interest Direct Interest Deemed Interest Number of Number of Number of Number of Shares % Shares % Shares % Shares % Mr. Low Kok Ann 68,000, ,080, Mr. Low See Ching 30,600, ,500, ,600, ,095, (a) (b) Mr. Low Kok Ann has a total direct interest in 68,000,000 Shares, which represents approximately per cent. of the total number of issued Shares as at the Latest Practicable Date. Pursuant to the Irrevocable Undertakings given by the Undertaking Shareholders, Mr. Low Kok Ann (as one of the Undertaking Shareholders) has informed the Company that he intends to (i) vote in favour of the Offer in respect of his total direct interest in 68,000,000 Shares, and (ii) accept the Offer in respect of his direct interest in 34,080,597 Shares. Mr. Low See Ching has a total direct interest and deemed interest of 123,100,000 Shares, which represents approximately per cent. of the total number of issued Shares as at the Latest Practicable Date. Pursuant to the Irrevocable Undertakings given by the Undertaking Shareholders, Mr. Low See Ching (as one of the Undertaking Shareholders) has informed the Company that he intends to (i) vote in favour of the Offer in respect of his total direct interest in 123,100,000 Shares, and (ii) accept the Offer in respect of his direct interest in 30,600,000 Shares and his deemed interest in 31,095,903 Shares. 6.3 Interests in shares of the Offeror. The Directors direct and deemed interests in the shares of the Offeror as at the Latest Practicable Date are set out in Appendix 1 to this Circular. 7. ADVICE OF THE IFA 7.1 IFA. TCMPL has been appointed as the independent financial adviser to advise the Directors in respect of the Offer. Shareholders should consider carefully the recommendation of the Directors and the advice of TCMPL to the Directors before deciding whether to accept or reject the Offer. TCMPL s advice is set out in its letter dated 30 January 2015, which is set out in pages 22 to 42 of this Circular (the IFA Letter ). 7 Held in the name of Bank of Singapore Nominees Pte Ltd, OCBC Securities Private Limited and Hong Leong Finance Nominees Pte Ltd. 8 Held in the name of Bank of Singapore Nominees Pte Ltd. 17

20 7.2 Factors Taken into Consideration by TCMPL. In arriving at its recommendation, TCMPL has taken into consideration certain factors, an extract of which is set out below. Shareholders should read the following extract in conjunction with, and in the context of, the full text of the IFA Letter. Unless otherwise stated, all terms and expressions used in the extract below shall have the meanings given to them in the IFA Letter. 8. OUR OPINION OF THE PARTIAL OFFER In arriving at our opinion, we have taken into account, a range of factors based on available information, which we consider to be pertinent and have a significant bearing on our assessment of the Partial Offer. Accordingly, it is important that this Letter should be read in its entirety. The principal factors that we have taken into consideration in forming our opinion are summarized below: (i) (ii) (iii) (iv) (v) Analysis of the historical liquidity of the Shares compared to the top ten companies by market capitalization on the FTSE STI, which suggests that the Shares do not suffer from illiquid trading conditions and that the historical market price of the Shares provides a meaningful reference point for comparison with the Offer Price; Analysis of historical Share price performance. In this regard, we note, inter alia, that the Shares has mostly traded below the Offer Price in the two-year period prior and up to the Announcement Date and has not closed at or above the Offer Price in the one-year period prior and up to the Announcement Date; The Offer Price is at a premium to the last traded Share price prior to the Partial Offer Announcement, 1-month VWAP, 3-month VWAP, 6-month VWAP and 12-month VWAP of the Shares for the period prior to and up to the Announcement Date. In this regard, we also note that the premium of the Offer Price to the last traded Share price prior to the Partial Offer Announcement is within the range and higher than the mean premium of the offer prices of the Non-Privatization Takeover Precedent Transactions, while the premia of the Offer Price to the 1-month VWAP and 3-month VWAP of the Shares are within the range but below the mean premia of the offer prices of the Non- Privatisation Takeover Precedent Transactions; The LTM EV/EBITDA multiple of the Company as implied by the Offer Price is significantly higher than the median and mean and above the range of LTM EV/EBITDA multiples of the Comparable Companies; the LTM P/E multiple of the Company as implied by the Offer Price is within the range of LTM P/E multiples and higher than the median and mean LTM P/E multiples of the Comparable Companies; and the P/NTA multiple of the Company as implied by the Offer Price is within the range and significantly higher than the median and mean P/NTA multiples of the Comparable Companies; The Offer Price represents a premium of approximately 150.5% to the unaudited NTA per Share as at 30 September 2014; (vi) The Offer Price represents a premium of 25.4% above the RNTA per Share as at 30 September 2014 on an As-is Basis and a premium of 6.7% above the RNTA per Share as at 30 September 2014 on a Redevelopment Basis. In this regard, we wish to highlight that Properties are held for use in the Group s principal business activities and mainly used by the Group for warehousing purposes and that the Offeror has stated that it presently has no intention to introduce any major changes to the business of the Company or to re-deploy the fixed assets of the Company. In addition, we note that the P/RNTA ratios of the Company as implied by the Offer Price are within the range and above the median and mean P/NTA ratios of the Non- Privatization Takeover Precedent Transactions; 18

21 (vii) (viii) The Offer Price is at a discount of approximately 23.2% to the average of the latest analysts price targets (which were issued in September 2014 and October 2014) for the Shares; and Other relevant considerations set out in Section 7.8 of this Letter. 7.3 Advice of TCMPL. After having regard to the considerations set out in the IFA Letter, and based on the circumstances of the Company and the information as at the Latest Practicable Date, TCMPL has made certain recommendations to the Directors, an extract of which is set out below. Shareholders should read the extract in conjunction with, and in the context of, the full text of the IFA Letter. Unless otherwise stated, all terms and expressions used in the extract below shall have the meanings given to them in the IFA Letter. Having considered all of the above and the information available to us as of the Latest Practicable Date, we are of the opinion that on balance, the financial terms of the Partial Offer are fair and reasonable. Accordingly, we advise the Directors to recommend Shareholders who are not prepared to accept the uncertainties facing the future prospects of the Group and/or who wish to take this opportunity to partially realize their investments in the Company at a premium to recent trading prices, to ACCEPT the Partial Offer or to SELL their Shares in the open market if they can obtain a price higher than the Offer Price (net of all related expenses). The Directors may also wish to consider highlighting to Shareholders that any tender of Excess Shares in acceptance of the Partial Offer may not be accepted in full by the Offeror and that there is a possibility that their resultant residual shareholdings may comprise odd-lots after the Partial Offer. 8. RECOMMENDATION OF THE DIRECTORS 8.1 Recommendation. The Directors (including Mr. Low Kok Ann and Mr. Low See Ching who are Undertaking Shareholders), having considered carefully the terms of the Offer and the advice given by TCMPL in the IFA Letter, concur with the advice of TCMPL in respect of the Offer, and accordingly, recommend that Shareholders vote in favour of the Offer and accept the Offer. The Directors, having considered carefully the advice given by TCMPL in the IFA Letter, wishes to highlight that any tender of Shares that are in excess of the number of Relevant Shares each Relevant Shareholder is entitled to tender in acceptance of the Partial Offer, may not be accepted in full by the Offeror and that there is a possibility that the resultant residual shareholdings may comprise odd-lots after the Offer. SHAREHOLDERS ARE ADVISED TO READ THE IFA LETTER SET OUT ON PAGES 22 TO 42 OF THIS CIRCULAR CAREFULLY BEFORE DECIDING WHETHER TO ACCEPT OR REJECT THE OFFER. SHAREHOLDERS SHOULD NOTE THAT THE OPINION AND ADVICE OF TCMPL AND/OR THE RECOMMENDATION OF THE DIRECTORS SHOULD NOT BE RELIED UPON BY ANY SHAREHOLDER AS THE SOLE BASIS FOR DECIDING WHETHER OR NOT TO ACCEPT THE OFFER. 8.2 No Regard to Specific Objectives. In making their recommendation, the Directors have not had regard to the general or specific objectives, financial situation, tax status, risk profiles or unique needs and constraints of any individual Shareholder. Accordingly, the Directors recommend that any individual Shareholder who may require advice in the context of his specific investment portfolio should consult his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately. 19

22 9. OVERSEAS SHAREHOLDERS 9.1 Overseas Shareholders. The availability of the Offer to Shareholders whose addresses are outside Singapore, as shown on the Share Register or the records of CDP (each, an Overseas Shareholder ) may be affected by the laws of the relevant jurisdictions. Overseas Shareholders should refer to Section 18 of the Offer Document which is reproduced in italics below. 18. OVERSEAS SHAREHOLDERS 18.1 Overseas Shareholders. The availability of the Partial Offer to Relevant Shareholders whose addresses are outside Singapore, as shown on the Register, or, as the case may be, in the records of CDP (each, an Overseas Shareholder ) may be affected by the laws of the relevant overseas jurisdictions. Accordingly, all Overseas Shareholders should inform themselves about, and observe, any applicable legal requirements in their own jurisdictions. For the avoidance of doubt, the Partial Offer is made to all Relevant Shareholders, including those to whom this Offer Document, the FAA and the FAT have not been, or will not be, sent, provided that this Offer Document does not constitute an offer or a solicitation to any person in any jurisdiction in which such offer or solicitation is unlawful and the Partial Offer is not being made into any jurisdiction in which the making or acceptance of the Partial Offer would not be in compliance with the laws of such jurisdiction. However, the Offeror may, in its sole discretion, take such action as it may deem necessary to extend the Partial Offer to Relevant Shareholders in any such jurisdiction Copies of the Offer Document, the FAA and the FAT. Relevant Shareholders (including Overseas Shareholders) may obtain copies of this Offer Document, the FAA, the FAT and any related documents, during normal business hours and up to the Closing Date from Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore or The Central Depository (Pte) Limited, 9 North Buona Vista Drive, #01-19/20 The Metropolis, Singapore Alternatively, Relevant Shareholders (including Overseas Shareholders) may write to Hap Seng Investment Holdings Pte. Ltd. c/o Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore or The Central Depository (Pte) Limited, 9 North Buona Vista Drive, #01-19/20 The Metropolis, Singapore , to request for this Offer Document, the FAA, the FAT and any related documents to be sent to an address in Singapore by ordinary post at his own risk, up to three Market Days prior to the Closing Date Notice. The Offeror reserves the right to notify any matter, including the fact that the Partial Offer has been made, to any or all Shareholders with a registered address outside Singapore by announcement to the SGX-ST or paid advertisement in a daily newspaper published and circulated in Singapore, in which case such notice shall be deemed to have been sufficiently given notwithstanding any failure by any Shareholder to receive or see such announcement or advertisement Overseas Jurisdiction. It is the responsibility of any Overseas Shareholder who wishes to accept the Partial Offer to satisfy himself as to the full observance of the laws of the relevant jurisdictions in that connection, including the obtaining of any governmental or other consent which may be required, or compliance with other necessary formalities or legal requirements. Such Overseas Shareholder shall be liable for the payment of any taxes, imposts, duties or other requisite payments payable. In accepting the Partial Offer, the Overseas Shareholder represents and warrants to the Offeror, MKES and CDP that he is in full observance of the laws of the relevant jurisdiction in that connection, and that he is in full compliance with all necessary formalities or legal requirements. If any Relevant Shareholder is in any doubt about his position, he should consult his professional adviser in the relevant jurisdiction. 9.2 Copies of Circular. This Circular may not be sent to Overseas Shareholders due to potential restrictions on sending such documents to the relevant overseas jurisdictions. Any affected Overseas Shareholder may, nevertheless, obtain copies of this Circular during normal business hours up to the Closing Date, from the office of the Share Registrar at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore , or make a request to the Share Registrar for this Circular to be sent to an address in Singapore by ordinary post at his own risk, up to five Market Days prior to the Closing Date. 20

23 10. ACTION TO BE TAKEN BY THE RELEVANT SHAREHOLDERS 10.1 Voting on the Offer. The Relevant Shareholders who wish to approve the Offer in respect of all or any number of Shares held by them as at the Record Date must do so not later than 5.30 p.m. (Singapore time) on 13 February 2015, abiding by the procedures for the voting of the Offer as set out in Section 8 of and Schedule 2 to the Offer Document, the FAA and/or the FAT Accepting the Offer. The Relevant Shareholders who wish to accept the Offer in respect of all or any number of Shares held by them as at the Record Date must do so not later than 5.30 p.m. (Singapore time) on 13 February 2015, abiding by the procedures for the acceptance of the Offer as set out in Section 8 of and Schedule 2 to the Offer Document, the FAA and/or the FAT. Acceptances should be completed and returned as soon as possible and, in any event, so as to be received, on behalf of the Offeror, by CDP (in respect of the FAA) or the Share Registrar (in respect of the FAT), as the case may be, not later than 5.30 p.m. (Singapore time) on 13 February The Relevant Shareholders who do not wish to accept the Offer need not take any further action in respect of the Offer Document, the FAA and/or the FAT which have been sent to them. 11. INFORMATION PERTAINING TO CPFIS INVESTORS As stated in Section 19.2 of the Offer Document, CPFIS Investors will receive further information on how to accept the Offer from their respective CPF Agent Banks directly. CPFIS Investors are advised to consult their respective CPF Agent Banks should they require further information, and if they are in any doubt as to the action they should take, CPFIS Investors should seek independent professional advice. CPFIS Investors who wish to accept the Offer are to reply to their respective CPF Agent Banks by the deadline stated in the letter from their respective CPF Agent Banks. Subject to the Offer becoming or being declared unconditional in accordance with its terms, CPFIS Investors who accept the Offer will receive the Offer Price payable in respect of their Offer Shares in their CPF investment accounts. 12. RESPONSIBILITY STATEMENT Save for the IFA Letter and the facts and opinions found in the Valuation Summary Letters and Valuation Certificates, the Directors (including any who may have delegated detailed supervision of this Circular) have taken all reasonable care to ensure that the facts stated and all opinions expressed in this Circular are fair and accurate and that no material facts have been omitted from this Circular, and the Directors jointly and severally accept full responsibility accordingly. Where any information has been extracted or reproduced from published or otherwise publicly available sources (including, without limitation, the Offer Document), the sole responsibility of the Directors has been to ensure through reasonable enquiries that such information is accurately extracted from such sources or, as the case may be, reflected or reproduced in this Circular. In respect of the IFA Letter and the Valuation Summary Letters and Valuation Certificates, the sole responsibility of the Directors has been to ensure that the facts stated with respect to the Group are fair and accurate. 13. ADDITIONAL INFORMATION The attention of the Shareholders is also drawn to the Appendices which form part of this Circular. Yours faithfully For and on behalf of the Board of Directors Low Kok Ann Executive Chairman & CEO 21

24 LETTER FROM THE IFA TO THE DIRECTORS (Incorporated in the Republic of Singapore) (Company Registration Number: M) 8 Shenton Way #19-01 AXA Tower Singapore January 2015 The Directors of Hafary Holdings Limited 105 Eunos Avenue 3 Hafary Centre Singapore Dear Sirs, VOLUNTARY CONDITIONAL CASH PARTIAL OFFER BY MAYBANK KIM ENG SECURITIES PTE. LTD. FOR AND ON BEHALF OF HAP SENG INVESTMENT HOLDINGS PTE. LTD. (THE OFFEROR ), A DIRECT WHOLLY-OWNED SUBSIDIARY OF HAP SENG CONSOLIDATED BERHAD, TO ACQUIRE 51 PER CENT. OF THE ORDINARY SHARES IN THE ISSUED SHARE CAPITAL OF HAFARY HOLDINGS LIMITED (THE COMPANY OR HAFARY ), OTHER THAN THOSE ALREADY OWNED, CONTROLLED OR AGREED TO BE ACQUIRED BY THE OFFEROR AND PARTIES ACTING IN CONCERT WITH IT Unless otherwise defined in this letter or the context otherwise requires, all terms used herein have the same meanings as defined in the circular to shareholders of the Company dated 30 January 2015 (the Circular ) and/or the offer document issued by Maybank Kim Eng Securities Pte. Ltd. for and on behalf of the Offeror dated 16 January 2015 (the Offer Document ). 1. INTRODUCTION On 30 December 2014 (the Announcement Date ), Maybank Kim Eng Securities Pte. Ltd. ( MKES ) announced on behalf of Hap Seng Investment Holdings Pte. Ltd., that the Offeror intends to make a voluntary conditional cash partial offer (the Partial Offer ) to acquire 51 per cent. of the ordinary shares in the issued share capital (the Shares ) of the Company as at the Record Date, other than those already owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it as at such date (the Partial Offer Announcement ). Tata Capital Markets Pte Ltd ( TCMPL ) has been appointed to act as Independent Financial Adviser ( IFA ) to the directors of the Company (the Directors ) for the purpose of making recommendations to the holders of Shares in issue ( Shareholders ) in respect of the Partial Offer. This letter ( Letter ) sets out our opinion arising from our evaluation of the Partial Offer, from a financial point of view, for inclusion in the Circular to be sent to the Shareholders in connection with the Partial Offer. It will form part of the Circular which provides the Shareholders with details of the Partial Offer and the recommendations of the Directors on the actions to be taken by the Shareholders in respect of the Partial Offer. 2. TERMS OF REFERENCE We have been appointed as IFA to the Directors to provide an assessment of the terms of the Partial Offer in order to advise the Directors in respect of their recommendation on the actions to be taken by the Shareholders in relation to the Partial Offer. We have confined our evaluation to 22

25 the financial terms of the Partial Offer and we are not required to evaluate or comment on the commercial risks and/or commercial merits of the Partial Offer or the future prospects of the Company and we have not made such an evaluation or comment. Such evaluation or comment, if any, remains the responsibility of the Directors and management (the Management ) of the Company although we may draw upon their views or make such comments in respect thereof (to the extent deemed necessary or appropriate by us) in arriving at our recommendations as set out in this Letter. We do not make any representation or warranty in relation to the merits of the Partial Offer nor do we express an opinion of the relative merits of the Partial Offer as compared to any alternative transaction previously considered by the Company or which otherwise may have been available to the Company currently or in the future. We have not been instructed or authorized to solicit, and we have not solicited, any indication of interest from any third party with respect to any other proposals for transactions similar to or in lieu of the Partial Offer. We have not made any independent evaluation or appraisal of the assets and liabilities and we have not been furnished with any such evaluation or appraisal except for the independent valuations commissioned by the Group to determine the market value of certain assets of the Group. With respect to such valuation reports, we are not experts in the evaluation or appraisal of the assets concerned and we have placed sole reliance on these valuation reports for such asset appraisal and have not made any independent verification of the contents thereof. The Valuation Summary Letters and Valuation Certificates in respect of the independent valuations are set out in Appendix 4 of the Circular. Our views as set out in this Letter are based upon the prevailing market, economic, industry and other conditions (if applicable) and our analysis of the information provided in the Circular as well as information and representations provided to us by the Company and its representatives, as at the latest practicable date of the Circular (the Latest Practicable Date or LPD ). As such, we assume no responsibility to update, revise or reaffirm our opinion in light of any subsequent development after the Latest Practicable Date that may affect our opinion contained herein. Shareholders should take note of any announcement relevant to their consideration of the Partial Offer, which may be released or published by or on behalf of the Company and/or the Offeror after the Latest Practicable Date. In the course of our evaluation, we have held discussions with the Directors, Management and/or their professional advisers and have examined and relied to a considerable extent on publicly available information collated by us as well as information provided and representations made to us, both written and verbal, by the Directors, the Management and/or the professional advisers of the Company, including information contained in the Circular. We have not independently verified such information or representations, whether written or verbal, and accordingly cannot and do not make any representation or warranty, express or implied, in respect of, and do not accept any responsibility for the accuracy, completeness or adequacy of such information or representations. We have relied upon the assurance of the Directors (including any who may have delegated detailed supervision of the Circular) that they have taken all reasonable care to ensure that the facts stated and all opinions expressed in the Circular are fair and accurate and that no material facts have been omitted from the Circular. The Directors have confirmed to us that, having made all reasonable enquiries and to the best of their knowledge and belief, all material information relating to the Group and the Partial Offer have been disclosed to us, that such information is fair and accurate in all material respects and that there are no other material facts and circumstances the omission of which would make any statement in the Circular inaccurate, incomplete or misleading in any material respect. Whilst care has been exercised in reviewing the information on which we have relied on, we have not independently verified the information but nevertheless have made such reasonable enquiries and exercised our judgment on the reasonable use of such information, and have found no reason to doubt the reliability of the information. The Company has been separately advised by its own professional advisers in the preparation of the Circular (other than this Letter). We have had no role or involvement, and do not provide any advice (financial or otherwise), in the preparation, review and verification of the Circular (other than this Letter). Accordingly, we take no responsibility for and express no views, whether express or implied, on the contents of the Circular (other than this Letter). 23

26 Unless otherwise defined, any reference in this Letter to the issued share capital of the Company is a reference to the 429,000,000 Shares in issue (excluding treasury shares) as at the Latest Practicable Date. Whilst a copy of this Letter may be reproduced in the Circular, neither the Company nor the Directors may reproduce, disseminate or quote this Letter (or any part thereof) for any other purposes at any time an in any manner, without the prior consent of TCMPL in each specific case. Our opinion in relation to the Partial Offer should be considered in the context of the entirety of this Letter and the Circular. 3. TERMS AND CONDITIONS OF THE PARTIAL OFFER The details of the Partial Offer are set out in Section 2 of the Circular, and Section 2 and Appendix 1 of the Offer Document. The key terms and conditions of the Partial Offer are summarized as follows: 3.1 Offer Shares The Partial Offer will be made for 51 per cent. of the Relevant Shares as at the Record Date (the Offer Shares ), in accordance with Section 139 of the SFA and the Code. 3.2 Relevant Shareholders The Partial Offer will be extended to all Shareholders as at the Record Date, other than the Offeror and parties acting in concert with it (the Relevant Shareholders ). 3.3 Offer Price The price for each Offer Share is as follows: For each Offer Share: S$0.24 in cash As stated in Section 2.8 of the Offer Document, the Offeror does not intend to increase the Offer Price. 3.4 Rights and Encumbrances The Offer Shares will be acquired (i) fully paid, (ii) free from all liens, equities, mortgages, charges, encumbrances, rights of pre-emption and other third party rights or interests of any nature whatsoever, and (iii) together with all rights, benefits and entitlements attached thereto as at the Announcement Date and hereafter attaching thereto, including all voting rights, the right to receive and retain all dividends, rights and other distributions (if any) announced, declared, paid or made by the Company on or after the Announcement Date. If any dividend, right, other distribution or return of capital is announced, declared, paid or made by the Company on or after the Announcement Date to a Shareholder who accepts or has accepted the Partial Offer, the Offeror reserves the right to reduce the Offer Price payable to such accepting Shareholder by the amount of such dividend, right, other distribution or return of capital. 3.5 Offer Conditions The Partial Offer will be subject to the following conditions: (a) the Offeror, having received by the Closing Date, valid acceptances in respect of at least 51 per cent. of the Relevant Shares as at the Record Date; and (b) the Offeror having received by the Closing Date, approval of the Partial Offer by the Relevant Shareholders representing more than 50 per cent. of the valid votes received (provided that the Offeror, parties acting in concert with it and their respective associates shall abstain from voting) (the Company Shareholders Resolution ). The Partial Offer will be unconditional in all other respects. 24

27 3.6 Hafary Performance Share Plan As at the Latest Practicable Date, the Company has granted an aggregate of 1,550,000 Shares which have been awarded but not yet allotted to participants of the Hafary Performance Share Plan. The terms of the Hafary Performance Share Plan provide that prior to the allotment of such Shares to which the award relates, such grants of awards are not transferable except with the prior approval of the committee administering the Hafary Performance Share Plan. Accordingly, the Partial Offer will not be extended to participants of the Hafary Performance Share Plan to whom such awards have been granted but the Shares of which have not been allotted. The Partial Offer will however be extended, on the same terms and conditions, to all new Shares which have been allotted and issued pursuant to the vesting of Shares under the Hafary Performance Share Plan prior to the Record Date. For the purposes of the Partial Offer, the expression Offer Shares shall include all such new Shares. 3.7 Closing Date The Partial Offer will close at 5.30 p.m. (Singapore time) on 13 February 2015 and the Offeror has given notice that the Partial Offer will not be revised or be open for voting and acceptance beyond 5.30 p.m. (Singapore time) on 13 February 2015, save that such notice shall not be capable of being enforced in a competitive situation. 4. IRREVOCABLE UNDERTAKINGS As stated in Section and Section 5 of the Circular, as at the Latest Practicable Date, the Offeror has received Irrevocable Undertakings from the Undertaking Shareholders to (i) accept and to procure the acceptance of, the Partial Offer in respect of 219,580,500 Shares in aggregate, representing approximately per cent. of the Shares in the issued share capital of the Company, and (ii) approve the Partial Offer in respect of 314,904,000 Shares in aggregate, representing approximately per cent. of the Shares in the issued share capital of the Company. Accordingly, as the Partial Offer is made to acquire 51.0 per cent. of the ordinary shares in the issued share capital of the Company, upon the Undertaking Shareholders tendering the Shares covered by their respective Irrevocable Undertakings in acceptance of the Partial Offer, the Partial Offer will become and be declared unconditional as to acceptances. The Irrevocable Undertakings will lapse if the Partial Offer is withdrawn or lapses without having become wholly unconditional. On 20 January 2015, MKES, for and on behalf of the Offeror, announced ( Offer Unconditional Announcement ) that the Offeror had on the same day received valid acceptances of the Partial Offer in respect of 239,680,500 Shares, representing approximately per cent. of the existing total number of issued Shares. The Offeror had also, on the same day, received votes in favour of the Partial Offer in respect of 314,904,000 Shares, representing approximately per cent. of the existing total number of issued Shares. Accordingly, the conditions of the Partial Offer have been duly satisfied and the Partial Offer has become and was declared unconditional in all respects as at 5.00 p.m. (Singapore time) on 20 January INFORMATION ON THE OFFEROR Please refer to Section 3 and Appendix 2 of the Circular for information on the Offeror. 25

28 6. OFFEROR S RATIONALE AND INTENTIONS The text stating the Offeror s rationale for the Partial Offer and its intentions for the Company has been extracted from Section 12 and 13 of the Offer Document and is set out in italics below. Shareholders are advised to read the extracts carefully. 12. RATIONALE FOR THE PARTIAL OFFER 12.1 HSCB, through the Offeror, is seeking to acquire a controlling interest in the Company as the Company would be complementary to HSCB s existing involvement in the building materials upstream market segment and a business combination between the Company and HSCB is expected to create strong synergistic benefits for the following reasons: HSCB is involved in upstream segment of the building materials market while the Company is a strong downstream candidate, being a distributor of internationally-acclaimed brands and having a diversified customer portfolio and an established and extensive distribution network; and the Company can facilitate HSCB s regional expansion to develop an integrated building materials business, having regard to (a) the Company being a market leader in the tiles segment in the Singapore market and (b) potential growth catalyst in the Company through emerging market presence in Vietnam and China. 13. THE OFFEROR S INTENTIONS FOR THE COMPANY 13.1 The Offeror s Future Plans for the Company. It is the intention of the Offeror to carry on and expand the existing business of the Company, and the Offeror presently has no intention to (i) introduce any major changes to the business of the Company, (ii) re-deploy the fixed assets of the Company or (iii) discontinue the employment of the employees of the Company, save in the ordinary course of the business. However, the Offeror retains the flexibility at any time to consider any options in relation to the Company which may present themselves and which the Offeror may regard to be in the interest of the Company Listing Status Listing Status of the Company. Under Rule 1105 of the Listing Manual, in the event that the Offeror and parties acting in concert with the Offeror should, as a result of the Partial Offer or otherwise, own or control more than 90 per cent. of the Shares (excluding treasury shares), the SGX-ST may suspend the trading of the Shares on the SGX-ST until such time when the SGX-ST is satisfied that at least 10 per cent. of the Shares (excluding treasury shares) are held by at least 500 Shareholders who are members of the public. In addition, under Rule 724(1) of the Listing Manual, if the percentage of the Shares (excluding treasury shares) held in public hands falls below 10 per cent., the Company must, as soon as possible, announce that fact and the SGX-ST may suspend trading of all the Shares on the SGX-ST. Pursuant to Rule 724(2) of the Listing Manual, the SGX-ST may allow the Company a period of three months, or such longer period as the SGX-ST may agree, to raise the percentage of Shares held by members of the public to at least 10 per cent., failing which the Company may be de-listed from the SGX-ST. As the Partial Offer is made for the Offer Shares, which, if successful will result in the Offeror and parties acting in concert with the Offeror holding 51 per cent. of the Shares in issue as at the Closing Date, the Offeror and parties acting in concert with the Offeror will not, as a result of the Partial Offer, own, control or acquire more than 90 per cent. of the Shares. Accordingly, Rules 1105 and 724(1) of the Listing Manual will not be invoked solely as a result of the Partial Offer Intention of the Offeror. It is the current intention of the Offeror to acquire a controlling shareholding interest in the Company and to maintain the listing status of the Company on the SGX-ST following completion of the Partial Offer. 26

29 13.3 No Compulsory Acquisition. Pursuant to Section 215(1) of the Companies Act, if the Offeror receives acceptances pursuant to the Partial Offer in respect of not less than 90 per cent. of the Shares in issue (other than those already held by the Offeror, its related corporations or their respective nominees as at the Record Date), the Offeror will have the right to compulsorily acquire at the Offer Price, all the Shares of the Shareholders who have not accepted the Partial Offer. Similarly, pursuant to Section 215(3) of the Companies Act, if the Offeror acquires such number of Shares which, together with Shares held by it, comprise not less than 90 per cent. of the Shares, Shareholders who have not accepted the Partial Offer will have the right to require the Offeror to acquire their Shares at the Offer Price. However, as the Partial Offer is made for the Offer Shares which, if successful, will result in the Offeror and parties acting in concert with it holding 51 per cent. of the Shares in issue as at the Closing Date, the Offeror and parties acting in concert with it will not, as a result of the Partial Offer, acquire 90 per cent. or more of the Shares in issue (other than those already held by the Offeror, its related corporations or their respective nominees as at the Record Date). Accordingly the aforesaid rights of compulsory acquisition will not arise as a result of the Partial Offer. 7. FINANCIAL ASSESSMENT OF THE PARTIAL OFFER In assessing the financial terms of the Partial Offer, we have taken into consideration the following factors which we consider to have a significant bearing on our assessment: (i) (ii) (iii) (iv) (v) (vi) (vii) (vii) Liquidity of the Shares; Historical Share price performance; Volume weighted average prices of the Shares; Trading multiples analysis against comparable listed companies; Net Tangible Assets ( NTA ) and revalued NTA ( RNTA ) of the Group; Premia for recent non-privatization takeovers of SGX-listed companies; Analysts Price Targets for the Shares; and Other relevant considerations. The figures used in our analyses, including share prices, trading volumes and free float data, have been extracted from Bloomberg, SGXNet and/or other public filings as at the Latest Practicable Date or provided by the Company where relevant. TCMPL makes no representations or warranties, express or implied, as to the accuracy or completeness of such information. TCMPL has nonetheless made reasonable enquiries and exercised its judgement on the reasonableness of such information and have found no reason to doubt the accuracy or reliability of such information. 7.1 Liquidity of the Shares To evaluate whether the historical market prices of the Shares provide a meaningful reference point for comparison against the Offer Price, we have considered the liquidity of the Shares, expressed as the average daily volume traded as a percentage of free float, relative to companies that make up the top ten largest companies by market capitalization within the FTSE Straits Times Index ( FTSE STI ). 27

30 Liquidity Analysis of the Company against the top ten FTSE STI companies Average Daily Trading Volume for the 12-month Average Daily Market Cap as at period up to Trading Volume Top 10 FTSE STI Announcement Free Float Announcement as a % of Companies Date (S$ m) % Date Free Float SINGAPORE 62, % 15,462, % TELECOMMUNICATIONS JARDINE MATHESON 55, % 221, % DBS GROUP HOLDINGS 50, % 3,774, % JARDINE STRATEGIC 50, % 176, % OVERSEA-CHINESE 41, % 4,362, % BANKING UNITED OVERSEAS BANK 39, % 2,132, % HONGKONG LAND 21, % 1,501, % WILMAR INTERNATIONAL 20, % 6,075, % THAI BEVERAGE 17, % 19,971, % KEPPEL CORP 16, % 3,805, % High 0.37% Low 0.09% Mean 0.17% Median 0.14% Hafary % 739, % Source: Bloomberg With respect to the table above, we note that in the twelve months leading up to the Announcement Date, the Company s average daily trading volume as a percentage to its free float is above the range and the mean liquidity measure of the top ten largest companies by market capitalization included within the FTSE STI. We have also considered the historical trading volume of the Shares for the 1-month, 3-month, 6- month and 12-month periods leading up to the Announcement Date, and the period after the Announcement Date up to the Latest Practicable Date as set out in the table below. We note that there was a significant increase in the trading volume/liquidity of the Shares on the Market Day immediately after the Partial Offer Announcement but average daily trading volume has since normalized for the period after the Partial Offer Announcement and up to the Latest Practicable Date. Liquidity Analysis of the Company Average Daily Daily Trading Volume Reference Period Trading Volume as a % of Free Float 12 months prior to Announcement Date 739, % 9 months prior to Announcement Date 871, % 6 months prior to Announcement Date 1,150, % 3 months prior to Announcement Date 1,342, % 2 months prior to Announcement Date 897, % 1 month prior to Announcement Date 517, % Announcement Date 145, % Market Day after Announcement Date 3,010, % From Market Day after Announcement Date to LPD 910, % Latest Practicable Date 97, % Source: Bloomberg 28

31 Overall, the above analysis suggests that the Shares do not suffer from illiquid trading conditions and that the historical market price of the Shares provides a meaningful reference point for comparison with the Offer Price. However, it should be noted that the level of liquidity of the Shares may make it difficult for Shareholders with substantial holdings to realize their Shares through a sale on the open market. The past liquidity of the Shares especially for the period after the Announcement Date should not in any way be relied upon as an indication of the future liquidity of the Shares. There is no assurance that the liquidity of the Shares will remain at these levels after the Partial Offer closes. 7.2 Historical Share Price Performance We have compared the Offer Price against the historical traded closing prices of the Shares. We set out below a chart showing the Offer Price relative to the daily closing prices and trading volumes of the Shares for the period from 31 Dec 2012 (being the two year period up to the Announcement Date) to the Latest Practicable Date. Announcement Date Offer Price Source: Bloomberg We highlight the following in respect of the historical traded closing price of the Shares: The Shares has mostly traded below the Offer Price of S$0.240, within the range of S$0.130 to S$0.265, in the period from 31 December 2012 to the Latest Practicable Date. The Shares has not closed at or above the Offer Price of S$0.240 per Share during the one year period preceding the Announcement Date. The Shares have traded below the Offer Price in the period post the Announcement Date and up to the Latest Practicable Date. We further set out below the daily closing prices of the Shares compared to the performance of the STI for the period from 31 December 2012 to the Latest Practicable Date. Hafary vs STI (rebased) from 31 December 2012 to the Latest Practicable Date Announcement Date Source: Bloomberg 29

32 From the above chart, we note that throughout the period from 31 December 2012 to the Latest Practicable Date, the Shares have outperformed the FTSE STI. 7.3 Volume weighted average prices of the Shares We have compared the Offer Price with the volume weighted average prices ( VWAP ) of the Shares (rounded to three decimal places) for the selected reference periods in the table below: For the period prior to and up to the Announcement Date Premium of VWAP / the Offer Lowest Highest Closing Price over transacted transacted Price VWAP price price (S$) (%) (S$) (S$) 12-month month month month Announcement Date For the period after the Announcement and up to the Latest Practicable Date Between the Announcement Date and up to LPD 20 January 2015, being the last traded day as at LPD Source: Bloomberg We highlight the following: The Offer Price represents a premium of 11.6% above the last traded Share price of S$0.215 on the Latest Practicable Date. The Offer Price represents a premium of 9.1% above the VWAP of the Shares for the period between the Announcement Date and up to the Latest Practicable Date. During this period, the Shares traded below the Offer Price and the highest traded price was S$ The Offer Price represents a premium of 9.1% over the last traded Share price of S$0.220 prior to the Partial Offer Announcement. The Offer Price represents a premium of 11.1%, 11.1% and 14.8% above the VWAPs for the 1-month, 3-month and 6-month period respectively prior to the Announcement Date. The Offer Price represents a premium of 16.5% above the VWAP of the Shares for the 12- month period prior to the Announcement Date. Shareholders should note that the price performance of the Shares may have been affected by market factors and other individual factors which may not be easily isolated and identified with certainty and that historical price performance should not, in any way, be relied upon as an indication of the future price levels of the Shares. Further, we do not express any view as to the prices at which the Shares of the Company may trade in the absence of the Partial Offer. 30

33 7.4 Trading multiples analysis against comparable listed companies We have considered selected companies listed in Singapore and overseas as trading comparables for the Company and which we believe provides a representative sample of tiles and flooring specialists companies that have significant geographical presence in Asia Pacific or are based in Asia Pacific (the Comparable Companies ). We highlight that we have not identified any listed company which is truly comparable to the Company in terms of the composition of its business activities, geographical spread, size of operations, asset base, track record, financial performance, operating and financial leverage, market capitalization, risk profile, liquidity, future prospects and other relevant criteria. As a result, any comparisons drawn from the following analysis can serve only as an illustrative guide. We have benchmarked the Offer Price by generating selected valuation multiples for the Company implied by the Offer Price and compared them with those for the Comparable Companies. In evaluating these companies we have collated and presented the following valuation multiples: LTM P/E A variation of the Price-to-Earnings ratio ( P/E ) where the earnings of a Company is computed based upon the last-twelve-month ( LTM ) period ending on the most recent quarter for which financial results have been published. The P/E is the ratio of market capitalization relative to its profit after tax attributable to shareholders of the Company ( NPAT ). The P/E is affected by, inter alia, the capital structure of a Company, its tax position as well as its accounting policies relating to depreciation and intangible assets. LTM EV/EBITDA A variation of the EV/EBITDA ratio where the EBITDA of a company is computed based upon the LTM period ending on the most recent quarter for which financial results have been published. EV or Enterprise Value is the sum of a company s market capitalization, preferred equity, minority interests, short and long term debts less its cash and cash equivalents. EBITDA stands for historical consolidated earnings before interest, tax, depreciation and amortization expenses. The EV/EBITDA ratio illustrates the ratio of the market value of a Company s business relative to its historical consolidated pre-tax operating cash flow performance, without regard to its capital structure. Price-to-Net Tangible Assets ( P/NTA ) NTA refers to the consolidated net tangible assets, which is the total assets of a company less intangible assets (such as goodwill, patents and trademarks) and total liabilities. P/NTA refers to the ratio of a company s share price divided by NTA per share. 31

34 A brief description of the Comparable Companies is set out below: Market Cap Company Name Description (S$ million) (1) Champion Building Champion Building manufactures and distributes Materials Co Ltd ceramic bricks, mosaic tiles, as well as ceramic ( Champion Building ) wall and floor tiles. KPT Industries, Ltd. KPT Industries manufactures and markets ceramic 32.6 ( KPT Industries ) building materials. KPT Industries produces indoor and outdoor ceramic floor and wall tiles. PT Kokoh Inti Arebama PT Kokoh distributes ceramic tiles Tbk ( PT Kokoh ) White Horse Berhad White Horse is an investment holding company (White Horse ) White Horse, through its subsidiaries, manufactures and distributes ceramic and homogenous tiles such as ceramic floor tiles, ceramic wall tiles, inter changeable floor and wall tiles, and multipipe series tiles. Yi-Lai Berhad Yi-Lai BHD is an investment holding company. Yi ( Yi-Lai BHD ) Lai BHD, through its subsidiaries, trades and distributes tiles as well as manufactures and sells ceramic and homogeneous tiles. Kim Hin Industry Berhad Kim Hin Industry manufactures and sells floor and 68.6 ( Kim Hin Industry ) wall tiles. Through its subsidiaries, Kim Hin Industry manufactures homogeneous and monoporosa tiles, trades building materials, and invests in property. Kim Hin Industry also leases property and manufactures ceramic wares. Seacera Group Berhad Seacera Group manufactures and trades ceramic 53.1 ( Seacera Group ) tiles. Seacera Group, through its subsidiaries, also manufactures biaxial oriented polypropylene films and develops software system. Royal Ceramics Lanka Royal Ceramics manufactures and sells ceramic PLC ( Royal Ceramics ) products. Nature Home Holding Nature Home manufactures and sells flooring Company Ltd. ( Nature Home ) products. Nature Home also trades in timber and flooring products. Nature Flooring, through its subsidiaries, offers laminated flooring, engineered flooring and solid wood flooring. Dongpeng Holdings Dongpeng Holdings produces ceramic tiles Company Limited ( Dongpeng Holdings ) Dongpeng Holdings designs, develops, markets and sells ceramic tile products and bathroom products including glazed and unglazed tiles, toilets and wash basins. Dongpeng Holdings offers its products throughout China. Source: Bloomberg Note: (1) Market Capitalisation of the Comparable Companies as at Latest Practicable Date. 32

35 We have compared the valuation multiples implied by the Offer Price with those of the Comparable Companies. Company Name LTM EV/EBITDA LTM P/E P/NTA (X) (x) (x) Champion Building 5.60 n.m (3) 0.51 KPT Industries PT Kokoh White Horse Yi-Lai BHD Kim Hin Industry Seacera Group Royal Ceramics Nature Home Dongpeng Holdings High Low Median Mean Hafary Holdings Limited (1)(2) Source: Bloomberg Notes: 1. Valuation multiples as implied by the Offer Price. 2. Based on the unaudited financial statements of the Company for the LTM period. 3. Not meaningful due to net loss. Based on the above analysis, we note that at the Offer Price: The LTM EV/EBITDA multiple of the Company as implied by the Offer Price is significantly higher than the median and mean and is higher than the range of LTM EV/EBITDA multiples of the Comparable Companies; The LTM P/E multiple of the Company as implied by the Offer Price is within the range of LTM P/E multiples and higher than the median and mean LTM P/E multiples of the Comparable Companies; and The P/NTA multiple of the Company as implied by the Offer Price is within the range of P/NTA multiples and significantly higher than the median and mean P/NTA multiples of the Comparable Companies. The above comparison with the Comparable Companies is for illustrative purposes only and it is relevant to note that the Comparable Companies are not subject to take-over offers as at the Latest Practicable Date and accordingly, the valuation multiples of the Comparable Companies above do not incorporate the premium typically required to acquire control. 7.5 NTA and RNTA of the Group The NTA based valuation approach provides an estimate of the value of a company assuming the hypothetical sale of all its tangible assets over a reasonable period of time and would usually be more relevant for asset based companies (for example, property developers) or where the subject company intends to realise or convert the uses of all or most of its assets. 33

36 Based on the latest unaudited consolidated balance sheet of the Group as at 30 September 2014, the Group had non-current assets of approximately S$77.6 million (of which 86.9% comprised of property, plant and equipment) and a consolidated NTA of approximately S$41.1 million. The Offer Price represents a premium of approximately 150.5% to the unaudited NTA per Share of 9.58 cents as at 30 September In this respect, the Directors have confirmed that, to their best knowledge and belief, as at the Latest Practicable Date, there are no contingent liabilities which are likely to have a material impact on the NTA of the Group. As disclosed under the notes to the audited financial statements of the Group for FY2014, property, plant and equipment of the Group are carried at cost less any accumulated depreciation and any accumulated impairment losses. In this regard, we note that the Company has appointed Knight Frank Pte Ltd and Knight Frank Petty Limited to conduct independent valuations of the Properties as at 30 September The Valuation Summary Letters and Valuation Certificates in respect of the valuation of the Properties are set out in Appendix 4 of the Circular. In this respect, the Directors have confirmed that to the best of their knowledge and belief, (i) save for the net revaluation surplus on the Properties, they are not aware of any circumstance that may cause the NTA of the Group as at the Latest Practicable Date to be materially different from that recorded in the unaudited balance sheet of the Group as at 30 September 2014; and (ii) there have been no material disposals or acquisitions of fixed assets by the Group since 30 September 2014 and up to the Latest Practicable Date. In assessing the RNTA of the Group, we will consider (i) the RNTA of the Group, taking into account the open market value of the Properties held by the Group in their existing use ( As-is Basis ), and (ii) the RNTA of the Group, taking into account the open market value of the Properties held by the Group after the proposed development that the Group intends to carry out on 18 Sungei Kadut Street 2, Singapore (the Redevelopment Property ) ( Redevelopment Basis ). In arriving at the net revaluation surplus based on the open market value of the Properties, we have also considered factors which may affect the RNTA per Share for the purpose of evaluating the Offer Price, such as the additional investment costs required to bring the Properties to the state of development upon which the assessed valuations were based and the potential tax liabilities on the hypothetical sale of the Properties at their assessed valuations. In this respect, we understand that the disposal of the Group s properties in Singapore will not attract capital gains tax on disposal and that seller stamp duties only applies to industrial properties acquired in Singapore on or after 12 January 2013 and disposed of within three years of acquisition. All of the Group s properties in Singapore, save for the Redevelopment Property, were acquired prior to 12 January 2013 and therefore will not attract any seller stamp duty if disposed of. The Redevelopment Property was acquired in April 2014 and we understand that under the lease agreement with the Jurong Town Corporation ( JTC ), there is a minimum holding period ( Minimum Holding Period ) requirement of 5 years. Accordingly, we have assumed that the Redevelopment Property will not be disposed of during the Minimum Holding Period and therefore seller stamp duty will not be applicable. (a) RNTA of the Group based on revaluation of the Properties on As-is Basis As at 30 September 2014, the net book value of the Properties, based on information provided by the Management, was approximately S$67.8 million and the aggregate open market value of the Properties on an As-is Basis, based on the valuation reports on the Properties, was approximately S$110.2 million. 34

37 The table below sets out the RNTA of the Group after adjusting for the net revaluation surplus on an As-is Basis: NTA of the Group as at 30 September 2014 Add: Net revaluation surplus on the Properties (As-is Basis) RNTA of the Group as at 30 September 2014 S$41.1 million S$41.0 million S$82.1 million RNTA per Share as at 30 September 2014 S$0.191 % Premium of Offer Price to RNTA per Share 25.4% Source: Company, Group s unaudited financial statements as at 30 September 2014, valuation reports on the Properties and TCMPL s calculations. The RNTA per Share of the Group on an As-is Basis is approximately S$0.191 per Share and the Offer Price represents a 25.4% premium above the RNTA per Share of the Group on an As-is Basis. (b) RNTA of the Group based on the revaluation of the Properties on Redevelopment Basis As stated in the annual report for the financial year ended 30 June 2014, the Redevelopment Property is located at the epicenter of the International Furniture Park (the IFP ) which JTC plans to position as Southeast Asia s premier global marketplace for furniture and furniture-related industries. As described in the valuation report relating to the Redevelopment Property, the proposed development plan includes erecting a 7-storey industrial building with commercial on the first and second storeys in place of the existing single-storey warehouse building with a 3-storey office building. As reported in the valuation report relating to the Redevelopment Property, an estimated S$38.0 million construction cost and estimated S$17.15 million development charge will be required to undertake this development, with construction expected to complete by April The Company holds an indirect interest of 46% in the Redevelopment Property. The table below sets out the RNTA of the Group after adjusting for the net revaluation surplus on a Redevelopment Basis: NTA of the Group as at 30 September 2014 Add: Net revaluation surplus on the Properties (Redevelopment Basis) RNTA of the Group as at 30 September 2014 S$41.1 million S$55.4 million S$96.5 million RNTA per Share as at 30 September 2014 S$0.225 % Premium of Offer Price to RNTA per Share 6.7% Source: Company, Group s unaudited financial statement as at 30 September 2014, valuation reports on the Properties and TCMPL s calculations. The RNTA per Share of the Group on a Redevelopment Basis is approximately S$0.225 per Share and the Offer Price represents a 6.7% premium above the RNTA per Share of the Group on a Redevelopment Basis. The Directors should note that although the assessments of the RNTA per Share form part of our overall analysis, whether such values are fully realizable or not in the market is uncertain and is dependent on the then prevailing regulations, market and economic conditions. Further, we also note that the Properties are held for use in the Group s principal business activities and mainly used by the Group for warehousing purposes and that the Offeror has stated that it presently has no intention to introduce any major changes to the business of the Company or to re-deploy the fixed assets of the Company. As such, the above analysis of the RNTA of the Group is meaningful only in so far as it shows the extent to which the value of each Share is backed by tangible assets. 35

38 The Directors have confirmed that as at the Latest Practicable Date: (i) save for the proposed development of the Redevelopment Property, the Group does not have any plans for the conversion of the use of any of the Properties; and (ii) the Group has not entered into negotiation with any party in respect of the impending disposal of any of the Properties and has not received any offers for any of the Properties. The above analysis of the RNTA of the Group based on the revaluation of the Properties should be considered and read in conjunction with the entirety of the Valuation Summary Letters and the Valuation Certificates set out in Appendix 4 of the Circular. 7.6 Premia for recent non-privatization takeovers of SGX-listed companies In assessing the reasonableness of the terms of the Partial Offer, we have also compared the financial terms of the Partial Offer with those of selected recent non-privatization takeovers of companies listed on the SGX-ST that were announced and completed from January 2013 to the Latest Practicable Date (the Non-Privatization Takeover Precedent Transactions ), for which the offerors do not intend for the target company to be delisted. For a more meaningful comparison, we have excluded the takeover of OKH Global Ltd. (formerly known as Sinobest Technology Holdings Ltd.) as the mandatory unconditional cash offer arose from a reverse takeover exercise. Our analysis of the Non-Privatization Takeover Precedent Transactions serves as a general indication of the relevant premium or discount that offerors had paid in order to acquire the target companies without having regard to their specific industry characteristics or other considerations. We wish to highlight that the list of target companies set out under the Non-Privatization Takeover Precedent Transactions are not directly comparable with the Company in terms of market capitalization, underlying liquidity of the shares, size of operations, business activities, accounting policies, financial performance, future prospects and other relevant criteria. Each transaction must be judged on its own commercial and financial merits. The premium (if any) that an offeror would pay to takeover a listed company depends on various factors, inter alia, the offeror s intentions with regard to the target company, the potential synergy that the offeror can gain from acquiring the target company, the presence of competing bids for the target company, prevailing market conditions and sometimes attractiveness and profitability of the target s business and assets and existing and desired level of control in the target company. Therefore, the comparison of the terms of the Partial Offer with the Non-Privatization Takeover Precedent Transactions set out below is for illustrative purposes only. Conclusions drawn from the comparisons made may not reflect any perceived market valuation of the Company. 36

39 Benchmarked Against 1-month 3-month Closing VWAP VWAP share price prior to prior to P/NTA (1) Announcement prior to Announcement Announcement (x) Company Date Date (%) Date (%) Date (%) 3Cnergy Limited (2) 4 Mar Dynamic Colours 3 May (3) Limited China Minzhong Food 2 Sept Corporation Limited Singapore Windsor 13 Sept (4) Holdings Limited Singapore Medical 14 Oct (5) Group Youyue International 18 Nov 2013 (34.2) (34.2) (19.5) 1.1 (6) Limited Boardroom Limited 22 Jan 2014 (0.9) 2.7 (2.9) n.m. (7) Communication Design 18 Feb (8) International Ltd Global Premium Hotels 13 Mar (9) Limited Olam International 14 Mar Limited Hotel Properties Limited 14 Apr (10) LCD Global Investments 21 Apr (11) Ltd. Kian Ho Bearings Limited 4 Jun 2014 (6.0) (12) High Low (34.2) (34.2) (19.5) 0.5 Median Mean Hafary Holdings Limited (i)1.3 / (ii)1.1 (13) Source: SGX-ST announcements and circulars to shareholders in relation to the Non-Privatization Takeover Precedent Transactions Notes: (1) Certain Non-Privatization Takeover Precedent Transactions had undertaken revaluations and/or adjustments to their assets which may have a material impact on their latest announced book values, as disclosed in their respective circulars. In such cases, we have compared the offer price to the revalued NTA, adjusted NTA or revalued NAV, as applicable. (2) Formerly known as HSR Global Limited. (3) Based on the price to revalued NTA ratio as extracted from the letter of the IFA of Dynamic Colours Limited for its takeover offer. (4) Based on the price to revalued NTA ratio as extracted from the letter of the IFA of Singapore Windsor Holdings Limited for its takeover offer. (5) Excluded as a statistical outlier for the computation of mean and median P/NTA. (6) Based on the price to revalued NTA ratio as extracted from the letter of the IFA of Youyue International Limited for its takeover offer. (7) n.m. denotes not meaningful, because of the negative NTA position of the group as disclosed in the circular of Boardroom Limited for its takeover offer. (8) Based on the price to revalued NTA ratio as extracted from the letter of the IFA of Communication Design International Ltd for its takeover offer. (9) Based on the price to NAV ratio as extracted from the letter of the IFA of Global Premium Hotels Limited for its takeover offer which includes the fair value of its hotel properties. 37

40 (10) Based on the price to revalued NAV ratio as extracted from the letter of the IFA of Hotel Properties Limited for its takeover offer. (11) Based on the price to revalued NAV ratio as extracted from the letter of the IFA of LCD Global Investments Ltd. for its takeover offer. (12) Based on the price to revalued NAV ratio as extracted from the letter of the IFA of Kian Ho Bearings Limited for its takeover offer. (13) Based on the Offer Price to RNTA ratios on: (i) As-is Basis; and (ii) Redevelopment Basis respectively, as explained in further details in Section 7.5 of this Letter. The key observations in respect of the above are highlighted below: The premium of the Offer Price over the last transacted price on the market day prior to the Announcement Date is within the range and higher than the mean premium but slightly below the median premium for the Non-Privatization Takeover Precedent Transactions. The premium of the Offer Price over the 1-month VWAP prior to the Announcement Date is within the range and lower than the mean and median premium for the Non-Privatization Takeover Precedent Transactions. The premium of the Offer Price over the 3-month VWAP prior to the Announcement Date is within the range and higher than the median premium but below the mean premium for the Non-Privatization Takeover Precedent Transactions. The P/RNTA ratio of 1.3 times (As-is Basis) and 1.1 times (Redevelopment Basis) implied by the Offer Price is within the range and higher than the mean and median P/NTA ratios (excluding the statistical outlier) for the Non-Privatization Takeover Precedent Transactions. 7.7 Analysts Price Targets for the Shares We have reviewed recent publicly available research reports published by brokerage/research firms with price targets on the Company s Shares after the release of the consolidated financial statements of the Group for the financial year ended 30 June 2014 and up to the Latest Practicable Date. The table below summarizes the price targets information reported in these research reports: Analyst price Between the Announcement Date targets as at: As at Announcement Date and the Latest Practicable Date Brokerage / Target Target research firm Date Rating Price (S$) Date Rating Price (S$) UOB Kay Hian 25-Sep-14 Buy DMG & Partners 1-Oct-14 Buy Source: Above mentioned research reports. Note: Save for the above research reports, we have not found any other research reports with price targets on the Company s Shares reported on Bloomberg, Thomson ONE or the public domain that was published between the Group s announcement of its FY2014 consolidated financial statements and the Latest Practicable Date. Based on the above, we note that the Offer Price is at a discount of approximately 23.2% to the average of the analysts price targets. We wish to highlight that the above analysts research reports may not be exhaustive and the price targets for the Shares represent the individual views of the respective analysts based on the circumstances (including, inter alia, economic, industry and monetary conditions as well as market sentiment and investor perceptions regarding the future prospects of the Company) prevailing at the date of the publication of the respective 38

41 research reports. The opinions of the analysts may change over time as a result of, among other things, changes in market conditions, the Company s corporate developments and the emergence of new information relevant to the Company. As such, the above price targets may not be an accurate prediction of future market prices of the Shares. 7.8 Other Relevant Considerations Irrevocable Undertakings and Implications on acceptances As mentioned in Section 4 of this Letter, as a result of the Undertaking Shareholders tendering the Shares covered by their respective Irrevocable Undertakings in acceptance of the Partial Offer and exercising the voting rights attached to the Voting Shares in favor of the Partial Offer, the Partial Offer has become and was declared unconditional in all respects as at 5.00 p.m. (Singapore time) on 20 January Each Relevant Shareholder will be entitled to accept the Partial Offer up to his Relevant Percentage Offer Shares, being 51 per cent. of the Relevant Shares (i.e. 510 Relevant Shares for every 1,000 Relevant Shares) held by it as at the Record Date, fractional entitlements to be disregarded. This means that Shareholders who accept the Partial Offer in respect of 51 per cent. or less of their shareholdings in the Company as at the Record Date, will have a guaranteed entitlement to full acceptances for such shareholdings tendered. Each Relevant Shareholder may, in addition to its Relevant Percentage Offer Shares, tender Shares that are in excess of the number of its Relevant Percentage Offer Shares (the Excess Shares ) for acceptances under the Partial Offer in the event any one or more Relevant Shareholders do not accept their full entitlement of their Relevant Percentage Offer Shares. Where the aggregate number of the Relevant Percentage Offer Shares accepted and the Excess Shares tendered by the Relevant Shareholders exceed the number of the Offer Shares, the Excess Shares tendered will be accepted up to the number of Offer Shares on a pro-rata basis (the Scale-back ) (but in a manner which minimizes the number of new odd-lot shareholdings as the Offeror may in its absolute discretion deem fit in the interest of the Offeror). Accordingly, Relevant Shareholders who wish or intend to maximize the level of successful acceptances may wish to consider tendering more than their entitlement under the Partial Offer. As at the Latest Practicable Date, the Offeror has announced that it has received valid acceptances of the Partial Offer in respect of 239,680,500 (comprising both Relevant Percentage Offer Shares and Excess Shares) representing approximately per cent. of the Shares in the issued share capital of the Company. Shareholders should also note that there is a possibility that their resultant residual shareholdings may comprise odd-lots after the Partial Offer. In the event no Relevant Shareholder other than the Undertaking Shareholders tenders his Shares in acceptance of the Partial Offer, the Offeror will acquire the Offer Shares entirely from the Undertaking Shareholders, leaving the Undertaking Shareholders with a balance shareholding of approximately 22.4% of the Shares in the issued share capital of the Company Listing Status and Compulsory Acquisition As the Partial Offer is made for the Offer Shares, which, if successful will result in the Offeror and parties acting in concert with the Offeror holding 51 per cent. of the Shares in issue as at the Closing Date, the Offeror and parties acting in concert with the Offeror will not, as a result of the Partial Offer, own, control or acquire more than 90 per cent. of the Shares and the Partial Offer will not result in: (a) either trading in the Shares on the SGX-ST being suspended or the Company being delisted from the SGX-ST due to a lack of public float; or 39

42 (b) the Offeror either being entitled or bound to exercise the rights of compulsory acquisition under Section 215(1) of the Companies Act. Neither would Shareholders be entitled to require the Offeror to acquire their Shares at the same terms as those under the Partial Offer under Section 215(3) of the Companies Act. The Offeror has stated that its current intention is to acquire a controlling shareholding interest in the Company and to maintain the listing status of the Company on the SGX-ST following completion of the Partial Offer No obligation to make a general offer The Partial Offer has become and has been declared unconditional in all respects. Accordingly, upon the close of the Partial Offer, the Offeror and parties acting in concert with the Offeror will hold 51 per cent. of the Shares in issue and will be able to exercise statutory control over the Company and will be free, subject to a six-month moratorium after the Closing Date, to acquire further Shares without incurring any obligation to make a general take-over offer for the Company Alternative Takeover Offer As at the Latest Practicable Date, there is no publicly available evidence of an alternative takeover offer for the Shares. Further, the Directors have also confirmed that as at the Latest Practicable Date, the Company has not received any alternative takeover offer from any other party The Offeror s plans for the Company The Offeror has stated, inter alia, the following intentions for the Company: It is the intention of the Offeror to carry on and expand the existing business of the Company, and the Offeror presently has no intention to (i) introduce any major changes to the business of the Company, (ii) re-deploy the fixed assets of the Company or (iii) discontinue the employment of the employees of the Company, save in the ordinary course of the business. However, the Offer retains the flexibility at any time to consider any options in relation to the Company which may present themselves and which the Offeror may regard to be in the interest of the Company. 8. OUR OPINION OF THE PARTIAL OFFER In arriving at our opinion, we have taken into account, a range of factors based on available information, which we consider to be pertinent and have a significant bearing on our assessment of the Partial Offer. Accordingly, it is important that this Letter should be read in its entirety. The principal factors that we have taken into consideration in forming our opinion are summarized below: (i) (ii) (iii) Analysis of the historical liquidity of the Shares compared to the top ten companies by market capitalization on the FTSE STI, which suggests that the Shares do not suffer from illiquid trading conditions and that the historical market price of the Shares provides a meaningful reference point for comparison with the Offer Price; Analysis of historical Share price performance. In this regard, we note, inter alia, that the Shares has mostly traded below the Offer Price in the two-year period prior and up to the Announcement Date and has not closed at or above the Offer Price in the one-year period prior and up to the Announcement Date; The Offer Price is at a premium to the last traded Share price prior to the Partial Offer Announcement, 1-month VWAP, 3-month VWAP, 6-month VWAP and 12-month VWAP of the Shares for the period prior to and up to the Announcement Date. In this regard, we also note that the premium of the Offer Price to the last traded Share price prior to the Partial Offer Announcement is within the range and higher than the mean premium of the offer prices of the Non-Privatization Takeover Precedent Transactions, while the premia of the Offer Price to the 1-month VWAP and 3-month VWAP of the Shares are within the range but below the mean premia of the offer prices of the Non-Privatisation Takeover Precedent Transactions; 40

43 (iv) (v) The LTM EV/EBITDA multiple of the Company as implied by the Offer Price is significantly higher than the median and mean and above the range of LTM EV/EBITDA multiples of the Comparable Companies; the LTM P/E multiple of the Company as implied by the Offer Price is within the range of LTM P/E multiples and higher than the median and mean LTM P/E multiples of the Comparable Companies; and the P/NTA multiple of the Company as implied by the Offer Price is within the range and significantly higher than the median and mean P/NTA multiples of the Comparable Companies; The Offer Price represents a premium of approximately 150.5% to the unaudited NTA per Share as at 30 September 2014; (vi) The Offer Price represents a premium of 25.4% above the RNTA per Share as at 30 September 2014 on an As-is Basis and a premium of 6.7% above the RNTA per Share as at 30 September 2014 on a Redevelopment Basis. In this regard, we wish to highlight that Properties are held for use in the Group s principal business activities and mainly used by the Group for warehousing purposes and that the Offeror has stated that it presently has no intention to introduce any major changes to the business of the Company or to re-deploy the fixed assets of the Company. In addition, we note that the P/RNTA ratios of the Company as implied by the Offer Price are within the range and above the median and mean P/NTA ratios of the Non-Privatization Takeover Precedent Transactions; (vii) The Offer Price is at a discount of approximately 23.2% to the average of the latest analysts price targets (which were issued in September 2014 and October 2014) for the Shares; and (viii) Other relevant considerations set out in Section 7.8 of this Letter. Having considered all of the above and the information available to us as of the Latest Practicable Date, we are of the opinion that on balance, the financial terms of the Partial Offer are fair and reasonable. Accordingly, we advise the Directors to recommend Shareholders who are not prepared to accept the uncertainties facing the future prospects of the Group and/or who wish to take this opportunity to partially realize their investments in the Company at a premium to recent trading prices, to ACCEPT the Partial Offer or to SELL their Shares in the open market if they can obtain a price higher than the Offer Price (net of all related expenses). The Directors may also wish to consider highlighting to Shareholders that any tender of Excess Shares in acceptance of the Partial Offer may not be accepted in full by the Offeror and that there is a possibility that their resultant residual shareholdings may comprise odd-lots after the Partial Offer. In rendering the above advice, we did not have regard to the specific investment objectives, financial situation, tax position, risk profiles or unique needs and constraints of any individual Shareholder or any specific group of the Shareholders. As each Shareholder would have different investment objectives and profiles, we recommend that any individual Shareholder or group of Shareholders who may require specific advice in relation to his or their investment portfolio(s) or objective(s) consult his or their stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately. Shareholders should note that the opinion and advice of TCMPL should not be relied upon by any Shareholder as the sole basis for deciding whether or not to accept the Partial Offer. Our opinion is addressed to the Directors for their benefit, in connection with and for the purpose of their consideration of the Partial Offer, and should not be relied on by any other party or for any other purpose. Any recommendation made by the Directors to the Shareholders remains the sole responsibility of the Directors. We wish to emphasize that we have been appointed to render our opinion as at the Latest Practicable Date. Our terms of reference do not require us to express, nor do we express, an opinion on the future growth prospects of the Company. The Directors should also note that the trading of the Shares of the Company are subject to, inter alia, prevailing economic and stock market conditions and economic outlook. Accordingly, our opinion of the Partial Offer does not and 41

44 cannot take into account future trading activities or patterns or price levels that may be established for the Shares of the Company after the Latest Practicable Date since these are governed by factors beyond the ambit of our review. This letter is governed by, and construed in accordance with, the laws of Singapore, and is strictly limited to the matters stated herein and there is no implication with regard to any other matter. Yours faithfully For and on behalf of TATA CAPITAL MARKETS PTE. LTD. Wayne Lee Chin Ing CEO & Executive Director Head of Corporate Finance Foo Say Nam Vice President Corporate Finance 42

45 APPENDICES APPENDIX 1 GENERAL INFORMATION 1. DIRECTORS The names, addresses and descriptions of the Directors as at the Latest Practicable Date are set out below: Name Address Designation Mr. Low Kok Ann 105 Eunos Avenue 3 Executive Chairman and Chief Hafary Centre Executive Officer Singapore Mr. Low See Ching 105 Eunos Avenue 3 Non-Executive Director Hafary Centre Singapore Mr. Ong Beng Chye 105 Eunos Avenue 3 Lead Independent Director Hafary Centre Singapore Mr. Terrance Tan Kong Hwa 105 Eunos Avenue 3 Independent Director Hafary Centre Singapore Mr. Chow Wen Kwan Marcus 105 Eunos Avenue 3 Independent Director Hafary Centre Singapore PRINCIPAL ACTIVITIES The Company was incorporated in the Republic of Singapore on 6 October 2009, and listed on the Catalist Board of the SGX-ST on 7 December The Company s listing was upgraded to the Mainboard of the SGX-ST with effect from 18 June The Company s registered office is at 105 Eunos Avenue 3, Hafary Centre, Singapore The Company, with its subsidiaries, is a supplier of premium tiles, stone, mosaic, wood-flooring, quartz top and sanitary ware and fittings in Singapore. It carries a variety of surfacing materials from Europe (mainly Italy and Spain) and Asia. The Group is organised into two core business segments: General and Project. The General segment is spearheaded by Hafary Pte Ltd, which supplies ceramics and stone tiles, quartz top and sanitary ware and fittings. Surface Project Pte. Ltd. and Surface Stone Pte. Ltd. provide surfacing materials for use in construction and development projects. Wood Culture Pte. Ltd. offers wood flooring, representing the Group in the building materials industry. The Group s joint venture, Melmer Stoneworks Pte. Ltd., specialises in the fabrication, polishing and profiling of stone and marble slabs for household and commercial purposes. The Company has an investment in a Vietnam associate, Viet Ceramics International Joint Stock Company, which is involved in the overseas tile retailing market. The Company also wholly owns Foshan Hafary Trading Co., Limited, its export agent in China. 43

46 3. SHARE CAPITAL 3.1 Issued Shares. As at the Latest Practicable Date, the Company has an issued and paid-up share capital of S$26,634,000 comprising 429,000,000 issued Shares (excluding treasury shares). As at the Latest Practicable Date, the Company has no Shares in treasury. Since the end of the previous financial year, the Company did not issue any new Shares. Shareholders should note that the Company has granted an aggregate of 1,550,000 Shares which have been awarded but not yet allotted to participants of the Hafary Performance Share Plan. Please refer to the announcement made by the Company on 1 August 2014 entitled Grant of Awards Pursuant to the Hafary Performance Share Plan for further information in this regard, which is available on the website of the SGX-ST at A copy of the said announcement is also available for inspection at the registered office of the Company. The Shares are ordinary shares carrying equal ranking rights to dividends, voting at general meetings and return of capital. The Company does not have any other class of share capital as at the Latest Practicable Date. There is no restriction in the Memorandum and Articles of Association of the Company on the right to transfer any Shares, which has the effect of requiring the holders of Offer Shares, before transferring them, to offer them for purchase to members of the Company or to any other person. 3.2 Rights in Respect of Capital, Dividends and Voting. The rights of Shareholders in respect of capital, dividends and voting in relation to the Shares is extracted from the Articles of Association of the Company and reproduced as follows: (a) Rights in Respect of Capital SHARES Dealings in the 6. The Company may purchase or otherwise acquire its issued Company s shares subject to and in accordance with the provisions of the Act and shares any other applicable rule, law or regulation enacted or promulgated by any relevant competent authority from time to time (the Applicable Laws ), on such terms and subject to such conditions as the Company may in general meeting prescribe in accordance with the Applicable Laws. Any shares purchased or acquired by the Company as aforesaid shall be dealt with in accordance with the Applicable Laws. Save as provided and then only to the extent permitted by the Applicable Laws, none of the funds or assets of the Company or of any subsidiary thereof shall be directly or indirectly employed in the purchase or subscription of or in loans upon the security of the Company s shares (or its holding company, if any) and the Company shall not, except as authorised by the Applicable Laws give any financial assistance for the purpose of or in connection with any purchase of shares in the Company (or its holding company, if any). Issue of New Shares 7. Subject to the Act and Article 50(2), no shares may be issued by the Directors without the prior approval of the Company in general meeting but subject thereto and to Article 52, and to any special rights attached to any shares for the time being issued, the Directors may issue, allot or grant options over or otherwise deal with or dispose of the same to such persons on such terms and conditions and at such time and subject or not to the payment of any part of the amount thereof in cash or otherwise as the Directors may think fit, and any shares may be issued in such denominations or with such preferential, deferred, qualified or special rights, privileges, conditions or restrictions, whether as regards dividend, return of capital, participation in surplus assets and profits, voting, conversion or otherwise, as the Directors may think fit, and 44

47 preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors, provided always that:- (i) (ii) (iii) the rights (including voting rights) attaching to shares of a class other than ordinary shares shall be expressed in the resolution creating the same; any issue of shares for cash to members holding shares of any class shall be offered to such members in proportion as nearly as may be to the number of shares of such class then held by them and the second sentence of Article 52(1) with such adaptations as are necessary shall apply; and the total number of issued preference shares shall not exceed the total number of the issued ordinary shares at any time. Rights attached to certain shares 8. (1) Preference shareholders shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance sheets and attending general meetings of the Company. Preference shareholders shall also have the right to vote at any meeting convened for the purpose of reducing the capital or winding up or sanctioning a sale of the undertaking of the Company or where the proposal to be submitted to the meeting directly affects their rights and privileges or when the dividend on the preference shares is more than six months in arrears. (2) The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares from time to time already issued or about to be issued. Variation of rights Rights of Preference Shareholders 9. (1) If at any time the share capital is divided into different classes, the repayment of preference capital other than redeemable preference capital and the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of the Act, whether or not the Company is being wound up, only be made, varied or abrogated with the sanction of a special resolution passed at a separate general meeting of the holders of shares of the class and to every such special resolution the provisions of Section 184 of the Act shall, with such adaptations as are necessary, apply. To every such separate general meeting the provisions of these Articles relating to general meetings shall mutatis mutandis apply; but so that the necessary quorum shall be two persons at least holding or representing by proxy or by attorney one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy or by attorney may demand a poll. Provided always that where the necessary majority for such a special resolution is not obtained at the general meeting, consent in writing if obtained from the holders of threefourths of the issued shares of the class concerned within two months of the general meeting shall be as valid and effectual as a special resolution carried at the general meeting. (2) The repayment of preference capital other than redeemable preference capital or any other alteration of preference shareholder rights, may only be made pursuant to a special resolution of the preference shareholders concerned. PROVIDED ALWAYS that where the necessary majority for such a special resolution is not obtained at the general meeting, consent in writing if obtained from the holders of three- 45

48 fourths of the preference shares concerned within two months of the meeting, shall be as valid and effectual as a special resolution carried at the general meeting. Creation or issue of further shares with special rights Power to pay commission and brokerage Treasury shares Power to charge interest on capital No trust recognised Joint holders 10. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the shares of that class or by these Articles as are in force at the time of such issue, be deemed to be varied by the creation or issue of further shares ranking equally therewith. 11. The Company may, unless otherwise restricted or specified by law, pay commissions or brokerage on any issue or purchase of its shares, or on the sale or disposal or transfer of treasury shares at such rate or in such amount and in such manner as the Directors may determine. Such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares, or partly in one way and partly in the other. The Company may also on any issue pay such brokerage as may be lawful. 12. The Company may hold its shares as treasury shares in accordance with the provisions of the Act and applicable laws. 13. If any shares of the Company are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be made profitable for a lengthened period, the Company may, subject to the conditions and restrictions mentioned in the Act, pay interest on so much of the share capital (except treasury shares) and may charge the same to capital as part of the cost of the construction or provision. 14. Except as required by law, no person other than the Depository shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these Articles or by law otherwise provided) any other rights in respect of any share, except an absolute right to the entirety thereof in the person (other than the Depository) entered in the Register of Members as the registered holder thereof or (where the person entered in the Register of Members as the registered holder of a share is the Depository) the person whose name is entered in the Depository Register in respect of that share. Nothing contained herein in this Article relating to the Depository or the Depositors or in any depository agreement made by the Company with any common depository for shares or in any notification of substantial shareholding to the Company or in response to a notice pursuant to Section 92 of the Act or any note made by the Company of any particulars in such notification or response shall derogate or limit or restrict or qualify these provisions; and any proxy or instructions on any matter whatsoever given by the Depository or Depositors to the Company or the Directors shall not constitute any notification of trust and the acceptance of such proxies and the acceptance of or compliance with such instructions by the Company or the Directors shall not constitute the taking of any notice of trust. 15. (1) The Company shall not be bound to register more than three persons as the joint holders of any share except in the case of executors, administrators of the estate or the trustees of a deceased member. 46

49 (2) If two or more persons are registered as joint holders of any share any one of such person may give effectual receipts for any dividend payable in respect of such share and the joint holders of a share shall, subject to the provisions of the Act, be severally as well as jointly liable for the payment of all instalments and calls and interest due in respect of such shares. (3) Only the person whose name stands first in the Register of Members or the Depository (as the case may be) as one of the joint holders of any share shall be entitled to delivery of the certificate relating to such share or to receive notices from the Company and any notice given to such person shall be deemed notice to all the joint holders. Only the person whose name stands first in the Depository Register shall be entitled to receive notices from the Company and any notice given to such person shall be deemed notice to all the joint holders. Fractional part of a share Payment of instalments Share certificates Entitlement to certificate 16. No person shall be recognised by the Company as having title to a fractional part of a share otherwise than as the sole or a joint holder of the entirety of such share. 17. If by the conditions of allotment of any shares the whole or any part of the amount of the issue price thereof shall be payable by instalments every such instalment shall, when due, be paid to the Company by the person who for the time being shall be the registered holder of the share or his personal representatives, but this provision shall not affect the liability of any allottee who may have agreed to pay the same. 18. The certificate of title to shares or debentures in the capital of the Company shall be issued under the Seal in such form as the Directors shall from time to time prescribe and may bear the autographic or facsimile signatures of at least two Directors, or by one Director and the secretary or some other person appointed by the Directors in place of the secretary for the purpose, and shall specify the number and class of shares to which it relates and the amounts paid thereon and such other information as may be prescribed by law from time to time. The facsimile signatures may be reproduced by mechanical or other means provided the method or system of reproducing signatures has first been approved by the Auditors of the Company. 19. (1) Shares must be allotted and certificates despatched within 10 Market Days of the final closing date for an issue of shares unless the SGX-ST shall agree to an extension of time in respect of that particular issue, The Depository must despatch statements to successful investor applicants confirming the number of shares held under their Securities Accounts. Persons entered in the Register of Members as registered holders of shares shall be entitled to certificates within 10 Market Days after lodgement of any transfer. In respect of a share or shares held jointly by several persons the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all such holders. Every registered shareholder shall be entitled to receive share certificates in reasonable denominations for his holding and where a charge is made for certificates, such charge shall not exceed S$2 (or such other sum as may be approved by the SGX-ST from time to time. Where a registered shareholder transfers part only of the shares comprised in a certificate or where a registered shareholder requires the Company to cancel any certificate or certificates and issue new certificates for the purpose of subdividing his holding in a different manner the old certificate or certificates shall be cancelled and a new certificate or certificates for the 47

50 balance of such shares issued in lieu thereof and the registered shareholder shall pay a fee not exceeding S$2 (or such other sum as may be approved by the SGX-ST from time to time) for each such new certificate as the Directors may determine. Where the member is a Depositor the delivery by the Company to the Depository of provisional allotments or share certificates in respect of the aggregate entitlements of Depositors to new shares offered by way of rights issue or other preferential offering or bonus issue shall to the extent of the delivery discharge the Company from any further liability to each such Depositor in respect of his individual entitlement. Retention of certificate New certificates may be issued New certificate in place of one not surrendered Power to increase capital (2) The retention by the Directors of any unclaimed share certificates (or stock certificates as the case may be) shall not constitute the Company a trustee in respect thereof. Any share certificate (or stock certificate as the case may be) unclaimed after a period of six years from the date of issue of such share certificate (or stock certificate as the case may be) may be forfeited and if so shall be dealt with in accordance with Article 40, 44, 48 and 49, mutatis mutandis. 20. (1) Subject to the provisions of the Act, if any share certificate shall be defaced, worn out, destroyed, lost or stolen, it may be renewed on such evidence being produced and a letter of indemnity (if required) being given by the shareholder, transferee, person entitled, purchaser, member firm or member company of the SGX-ST or on behalf of its or their client or clients as the Directors of the Company shall require, and in case of defacement or wearing out, on delivery up of the old certificate and in any case on payment of such sum not exceeding S$2 (or such other sum as may be approved by the SGX-ST from time to time) as the Directors may from time to time require. In the case of destruction, loss or theft, a shareholder or person entitled to whom such renewed certificate is given shall also bear the loss and pay to the Company all expenses incidental to the investigations by the Company of the evidence of such destruction or loss. (2) When any shares under the powers in these Articles herein contained are sold by the Directors and the certificate thereof has not been delivered up to the Company by the former holder of the said shares, the Directors may issue a new certificate for such shares distinguishing it in such manner as they may think fit from the certificate not so delivered up. ALTERATION OF CAPITAL 50. (1) The Company in general meeting may from time to time by ordinary resolution, whether all the shares for the time being issued shall have been fully called up or not, increase its capital by the creation of new shares of such amount as may be deemed expedient. (2) Notwithstanding Article 50(1) above, the Company may by ordinary resolution in general meeting give to the Directors a general authority, either unconditionally or subject to such conditions as may be specified in the ordinary resolution, to:- issue shares in the capital of the Company whether by way of rights, bonus or otherwise, and/or make or grant offers, agreements or options (collectively, Instruments ) that might or would require shares to be issued, including but not limited to the creation and issue of warrants, debentures or other instruments convertible into shares; and 48

51 (notwithstanding that the authority conferred by the ordinary resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while the ordinary resolution was in force, provided that:- (i) (ii) in exercising the power to make or grant Instruments (including the making of any adjustments under any relevant Instrument, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance is waived by the SGX-ST) and these Articles; and (unless revoked or varied by the Company in general meeting) the authority conferred by the ordinary resolution shall not continue in force beyond the conclusion of the annual general meeting of the Company next following the passing of the ordinary resolution, or the date by which such annual general meeting of the Company is required by the law to be held, or the expiration of such other period as may be prescribed by law (whichever is the earliest). Power to increase capital Issue of new shares to members 51. Subject to any special rights for the time being attached to any existing class of shares, the new shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as the general meeting resolving upon the creation thereof shall direct and if no direction be given as the Directors shall determine; subject to the provisions of these Articles and in particular (but without prejudice to the generality of the foregoing) such shares may be issued with a preferential or qualified right to dividends and in the distribution of assets of the Company or otherwise. 52. (1) Subject to any direction to the contrary that may be given by the Company in general meeting (including the authority given by the Company pursuant to Article 50(2)) or except as permitted under the listing rules of the SGX-ST, all new shares shall, before issue, be offered to the members in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled or hold. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the Directors may dispose of those shares in such manner as they think most beneficial to the Company. The Directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the Directors, be conveniently offered under this Article. (2) Notwithstanding Article 52(1) above but subject to the Act, the Directors shall not be required to offer any new shares to members to whom by reason of foreign securities laws such offers may not be made without registration of the shares or a prospectus or other document, but to sell the entitlements to the new shares on behalf of such members in such manner as they think most beneficial to the Company. 49

52 New shares otherwise subject to provisions of Articles Power to consolidate, cancel and subdivide shares 53. Except so far as otherwise provided by the conditions of issue or by these Articles, any capital raised by the creation of new shares shall be considered part of the original ordinary capital of the Company and shall be subject to the provisions of these Articles with reference to allotments, payment of calls, lien, transfer, transmission, forfeiture and otherwise. 54. The Company may by ordinary resolution alter its share capital in the manner permitted under the Act and applicable laws, including (without limitation):- (i) (ii) (iii) (iv) consolidate and divide all or any of its share capital; cancel any shares which, at the date of the passing of the Resolution, have not been taken or agreed to be taken by any person or which have been forfeited and diminish the its share capital by the number of the shares so cancelled; subdivide its shares or any of them (subject, nevertheless, to the provisions of the Act), provided always that in such subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; and subject to the provisions of these Articles and the Act, convert any class of shares into any other class of shares. Power to reduce capital 55. The Company may by Special Resolution reduce its share capital or other undistributable reserves in any manner and subject to any incident authorised and consent required by law. Without prejudice to the generality of the foregoing, upon cancellation of any share purchased or otherwise acquired by the Company pursuant to these Articles, the number of issued shares of the Company shall be diminished by the number of the shares so cancelled, and, where any such cancelled share was purchased or acquired out of the capital of the Company, the amount of share capital of the Company shall be reduced accordingly. (b) Rights in Respect of Dividends DIVIDENDS Payment of 129. The Directors may, with the sanction of the Company, by ordinary dividends resolution declare dividends but (without prejudice to the powers of the Company to pay interest on share capital as hereinbefore provided) no dividend shall be payable except out of the profits of the Company, or in excess of the amount recommended by the Directors, save as otherwise permitted by the Act. Apportionment of dividends 130. Subject to the rights of holders of shares with special rights as to dividend (if any), and subject always to the provisions of the Act, all dividends shall be declared and paid according to the number of issued and fully paid shares in respect whereof the dividend is paid, but no amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this Article as paid on the share. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid but if any share is issued on terms providing that it shall rank for dividend as from a particular date 50

53 such shares shall rank for dividend accordingly. Where shares are partly paid, dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid thereon. Payment of preference and interim dividends Dividends not to bear interest Deduction from dividend Retention of dividends on shares subject to lien Retention of dividends on shares pending transmission Unclaimed dividends Payment of dividend in specie 131. Notwithstanding Article 130, if, and so far as in the opinion of the Directors, the profits of the Company justify such payments, the Directors may pay fixed preferential dividends on any express class of shares carrying a fixed preferential dividend expressed to be payable on a fixed date on the half-yearly or other dates (if any) prescribed for the payment thereof by the terms of issue of the shares, and subject thereto may also from time to time pay to the holders of any other class of shares interim dividends thereon of such amounts and on such dates as they may think fit No dividend or other moneys payable on or in respect of a share shall bear interest against the Company The Directors may deduct from any dividend or other moneys payable to any member on or in respect of a share all sums of money (if any) presently payable by him to the Company on account of calls or in connection therewith, or any other account which the Company is required by law to withhold or deduct The Directors may retain any dividend or other moneys payable on or in respect of a share on which the Company has a lien and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists The Directors may retain the dividends payable on shares in respect of which any person is under these Articles, as to the transmission of shares, entitled to become a member, or which any person under these Articles is entitled to transfer, until such person shall become a member in respect of such shares or shall duly transfer the same The payment by the Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. All dividends unclaimed after being declared may be invested or otherwise made use of by the Directors for the benefit of the Company and any dividend unclaimed after a period of six years from the date of declaration of such dividend may be forfeited and if so shall revert to the Company but the Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the dividend so forfeited to the person entitled thereto prior to the forfeiture. For the avoidance of doubt no member shall be entitled to any interest, share of revenue or other benefit arising from any unclaimed dividends, howsoever and whatsoever The Company may, upon the recommendation of the Directors, by ordinary resolution direct payment of a dividend in whole or in part by the distribution of specific assets and in particular of paid up shares or debentures of any other company or in any one or more of such ways, and the Directors shall give effect to such Resolution, and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to 51

54 any members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors. Dividends payable by cheque Effect of transfer Power to carry profit to reserve Power to capitalize profits 138. Any dividend or other moneys payable in cash on or in respect of a share may be paid by cheque or warrant sent through the post to the registered address of the member or person entitled thereto or, if several persons are registered as joint holders of the share or are entitled thereto in consequence of the death or bankruptcy of the holder, to any one of such persons or to such person and such address as such persons may by writing direct Provided that where the member is a Depositor, the payment by the Company to the Depository of any dividend payable to a Depositor shall to the extent of the payment discharge the Company from any further liability in respect of the payment. Every such cheque and warrant shall be made payable to the order of the person to whom it is sent or to such person as the holder or joint holders or person or persons entitled to the share in consequence of the death or bankruptcy of the holder may direct and payment of the cheque if purporting to be endorsed or the receipt of any such person shall be a good discharge to the Company. Every such cheque and warrant shall be sent at the risk of the person entitled to the money represented thereby A transfer of shares shall not pass the right to any dividend declared on such shares before the registration of the transfer. RESERVES 140. The Directors may, before recommending any dividend, from time to time set aside out of the profits of the Company and carry to reserve such sums as they think proper which, at the discretion of the Directors, shall be applicable for meeting contingencies or for the gradual liquidation of any debt or liability of the Company or for repairing or maintaining the works, plant and machinery of the Company or for special dividends or bonuses or for equalising dividends or for any other purpose to which the profits of the Company may properly be applied and pending such application may either be employed in the business of the Company or be invested. The Directors may divide the reserve into such special funds as they think fit and may consolidate into one fund, any special funds or any parts of any special funds into which the reserve may have been divided, The Directors may also, without placing the same to reserve, carry forward any profits which they may think it not prudent to divide. CAPITALISATION OF PROFITS AND RESERVES 141. The Company may, upon the recommendation of the Directors, by ordinary resolution resolve that it is desirable to capitalise any sum for the time being standing to the credit of any of the Company s reserve accounts or any sum standing to the credit of the profit and loss account or otherwise available for distribution; provided that such sum be not required for paying the dividends on any shares carrying a fixed cumulative preferential dividend and accordingly that the Directors be authorised and directed to appropriate the sum resolved to be capitalised to the members holding shares in the Company in the proportions in which such sum would have been divisible among them had the same been applied or have been applicable in paying dividends and to apply such sum on their behalf either in or towards paying up the amounts (if any) for the time being unpaid on any shares held by such members respectively, or in paying up in full unissued shares or debentures of the Company, such shares or debentures to be allotted and distributed and credited as fully paid up to and among such members in the proportion 52

55 aforesaid or partly in one way and partly in the other. Where any difficulty arises in respect of any such distribution the Directors may settle the same as they think expedient and in particular they may fix the value for distribution of any fully paid-up shares or debentures, make cash payments to any members on the footing of the value so fixed in order to adjust rights, and vest any such shares or debentures in trustees upon such trusts for the persons entitled to share in the appropriation and distribution as may seem just and expedient to the Directors. When deemed requisite a proper contract for the allotment and acceptance of any shares to be distributed as aforesaid shall be delivered to the Registrar of Companies for registration in accordance with the Act and the Directors may appoint any person to sign such contract on behalf of the persons entitled to share in the appropriation and distribution and such appointment shall be effective. Bonus shares 142. The Directors may, with the sanction of an ordinary resolution of the Company issue bonus shares for which no consideration is payable to the Company to the persons registered as holders of shares in the Register of Members or (as the case may be) in the Depository Register at the close of business on: (i) (ii) the date of the ordinary resolution (or such other date as may be specified therein or determined as therein provided); or (in the case of an ordinary resolution passed pursuant to Article 7) such other date as may be determined by the Directors, In proportion to their then holdings of shares. Directors to do all acts and things to give effect 143. Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the sum resolved to be capitalised thereby, all allotments and issues of fully paid shares or debentures (if any), and generally shall do all acts and things required to give effect thereto and also to authorise any person to enter on behalf of all the members entitled thereto into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalisation and/or bonus issue or (as the case may require) for the payment up by the Company on their behalf, by the application thereto of their respective proportions of the sum resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares and any agreement made under such authority shall be effective and binding on all such members. (c) Rights in Respect of Voting GENERAL MEETINGS Annual General 60. (1) Subject to the provisions of the Act, the Company shall in Meeting each year hold a general meeting in addition to any other meetings in that year to be called the annual general meeting, and not more than fifteen months shall elapse between the date of one annual general meeting of the Company and that of the next. The annual general meeting shall be held at such time and place as the Directors shall appoint. 53

56 Extraordinary General Meetings Calling of Extraordinary General Meetings Notice of Meetings (2) All general meetings other than annual general meetings shall be called extraordinary general meetings. 61. The Directors may, whenever they think fit, convene an extraordinary general meeting and extraordinary general meetings shall also be convened on such requisition or, in default, may be convened by such requisitionists as provided by Section 176 of the Act. If at any time there are not within Singapore sufficient Directors capable of acting to form a quorum at a meeting of Directors, any Director may convene an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be convened by the Directors. NOTICE OF GENERAL MEETINGS 62. (1) Any general meeting at which it is proposed to pass special resolutions or (save as provided by the provisions of the Act) a resolution of which special notice has been given to the Company, shall be called by at least twenty-one days notice in writing (exclusive both of the day on which the notice is served or deemed to be served and of the day for which the notice is given) and an annual general meeting or any other general meeting by at least fourteen days notice in writing (exclusive both of the day on which the notice is served or deemed to be served and of the day for which the notice is given) to such persons (including the Auditors) as are under the provisions herein contained entitled to receive notice from the Company and at least fourteen days notice of such Meeting shall be given by advertisement in the daily press and in writing to the SGX-ST or to each stock exchange on which the Company is listed. (2) The accidental omission to give notice to, or the non-receipt by any person entitled thereto, shall not invalidate the proceedings at any general meeting. Contents of Notice Notice of Annual General Meeting Nature of special business to be specified Special business 63. (1) Every notice calling a general meeting shall specify the place and the day and hour of the Meeting and there shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and to vote instead of him and that a proxy need not be a member of the Company. (2) In the case of an annual general meeting, the notice shall also specify the Meeting as such. (3) In the case of any general meeting at which business other than routine business is to be transacted (special business), the notice shall specify the general nature of the special business, and if any resolution is to be proposed as a Special Resolution or as requiring special notice, the notice shall contain a statement to that effect. 64. All business shall be deemed special that is transacted at any extraordinary general meeting, and all that is transacted at an annual general meeting shall also be deemed special, with the exception of sanctioning a dividend, the consideration of the accounts and balance sheet and the reports of the Directors and Auditors, and any other documents required to be annexed to the balance sheet, electing Directors in place of those retiring by rotation or otherwise and the fixing of the Directors remuneration and the appointment and fixing of the remuneration of the Auditors or determining the manner in which such 54

57 remuneration is to be fixed. Any notice of a meeting called to consider special business shall be accompanied by a statement regarding the effect of any proposed resolution in respect of such special business. Quorum Adjournment if quorum not present Resolutions in writing Chairman Adjournment Method of Voting PROCEEDINGS AT GENERAL MEETINGS 65. No business shall be transacted at any general meeting unless a quorum is present at the time the meeting proceeds to business. Save as herein otherwise provided, two members present in person shall form a quorum. For the purpose of this Article, member includes a person attending by proxy or by attorney or as representing a corporation which is a member, Provided that (i) a proxy representing more than one member shall only count as one member for the purpose of determining the quorum; and (ii) where a member is represented by more than one proxy such proxies shall count as only one member for the purpose of determining the quorum. 66. If within half an hour from the time appointed for the Meeting a quorum is not present, the meeting if convened on the requisition of members shall be dissolved. In any other case it shall stand adjourned to the same day in the next week at the same time and place, or to such other day and at such other time and place as the Directors may determine, and if at such adjourned meeting a quorum is not present within half an hour from the time appointed for holding the meeting, the meeting shall be dissolved. 67. Subject to the Act, a resolution in writing signed by every member of the Company entitled to vote or being a corporation by its duly authorised representative shall have the same effect and validity as an ordinary resolution of the Company passed at a general meeting duly convened, held and constituted, and may consist of several documents in the like form, each signed by one or more of such members. 68. The Chairman of the Directors or, in his absence, the Deputy Chairman (if any) shall preside as Chairman at every general meeting. If there is no such Chairman or Deputy Chairman or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting or is unwilling to act, the members present shall choose some Director to be Chairman of the meeting or, if no Director is present or if all the Directors present decline to take the Chair, some member present to be Chairman. 69. The Chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place. When a meeting is adjourned for fourteen days or more, notice of the adjourned meeting shall be given as in the case of the original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. 70. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded:- (i) by the Chairman of the meeting; or 55

58 (ii) (iii) (iv) by at least two members present in person or by proxy (where a member has appointed more than one proxy, any one of such proxies may represent that member) or attorney or in the case of a corporation by a representative and entitled to vote thereat; or by any member or members present in person or by proxy (where a member has appointed more than one proxy, any one of such proxies may represent that member) or attorney or in the case of a corporation by a representative or any number or combination of such members, holding or representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or by a member or members present in person or by proxy (where a member has appointed more than one proxy, any one of such proxies may represent that member) or attorney or in the case of a corporation by a representative or any number or combination of such members, holding or representing shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. Provided always that no poll shall be demanded on the election of a Chairman or on a question of adjournment. An instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll. Unless a poll is so demanded (and the demand is not withdrawn) a declaration by the Chairman that a resolution has been carried or carried unanimously or by a particular majority or lost and an entry to that effect in the minute book shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. A demand for a poll may be withdrawn. Taking a poll Votes counted In error Chairman s Casting vote 71. If a poll is duly demanded (and the demand is not withdrawn) it shall be taken in such manner (including the use of ballot or voting papers or tickets) either at once or after an interval or adjournment or otherwise as the Chairman may direct and the result of a poll shall be deemed to be the resolution of the meeting at which the poll was demanded but a poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith. The Chairman may, and if so requested shall, appoint scrutineers and may adjourn the meeting to some place and time fixed by him for the purpose of declaring the result of the poll. 72. If any votes are counted which ought not to have been counted or might have been rejected, the error shall not vitiate the result of the voting unless it is pointed out at the same meeting or at any adjournment thereof, and not in that case unless it shall in the opinion of the Chairman be of sufficient magnitude. 73. Subject to the Act and the requirements of the SGX-ST, in the case of equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote in addition to the votes to which he may be entitled as a member or as proxy of a member. 56

59 Time for Taking a poll Continuance of business after demand for a poll 74. A poll demanded on any question shall be taken either immediately or at such subsequent time (not being more than thirty days from the date of the meeting) and place as the Chairman may direct. No notice need be given of a poll not taken immediately. 75. The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business, other than the question on which the poll has been demanded. Voting rights of members Voting rights of joint holders VOTES OF MEMBERS 76. Subject and without prejudice to any rights or special privileges or restrictions as to voting for the time being attached to any special class of shares for the time being forming part of the capital of the Company each member entitled to vote may vote in person or by proxy or attorney, and (in the case of a corporation) by a representative. On a show of hands every member who is present in person or by proxy or attorney, or in the case of a corporation by a representative, shall have one vote provided that if a member is represented by two proxies, only one of the two proxies as determined by their appointor shall vote on a show of hands and in the absence of such determination, only one of the two proxies as determined by the Chairman (or by a person authorised by him) shall vote on a show of hands and on a poll, every member who is present in person or by proxy, attorney or representative shall have one vote for each share which he holds or represents Provided Always That notwithstanding anything contained in these Articles, a Depositor shall not be entitled to attend any general meeting and to speak and vote thereat unless his name is certified by the Depository to the Company as appearing on the Depository Register not earlier than 48 hours before that general meeting (the cut-off time) as a Depositor on whose behalf the Depository holds shares in the Company. For the purpose of determining the number of votes which a Depositor or his proxy may cast on a poll, the Depositor or his proxy shall be deemed to hold or represent that number of shares entered in the Depositor s Securities Account at the cut-off time as certified by the Depository to the Company, or where a Depositor has apportioned the balance standing to his Securities Account as at the cut-off time between two proxies, to apportion the said number of shares between the two proxies in the same proportion as specified by the Depositor in appointing the proxies; and accordingly no instrument appointing a proxy of a Depositor shall be rendered invalid merely by reason of any discrepancy between the number of shares standing to the credit of that Depositor s Securities Account as at the cutoff time, and the true balance standing to the Securities Account of a Depositor as at the time of the relevant general meeting, if the instrument is dealt with in such manner as aforesaid. 77. Where there are joint holders of any share any one of such persons may vote and be reckoned in a quorum at any meeting either personally or by proxy or by attorney or in the case of a corporation by a representative as if he were solely entitled thereto but if more than one of such joint holders is so present at any meeting then the person present whose name stands first in the Register of Members or the Depository Register (as the case may be) in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 57

60 Voting rights of members of unsound mind Right to vote Objections Votes on a poll Appointment of proxies 78. If a member be a lunatic, idiot or non-compos mentis, he may vote whether on a show of hands or on a poll by his committee, curator bonis or such other person as properly has the management of his estate and any such committee, curator bonis or other person may vote by proxy or attorney, provided that such evidence as the Directors may require of the authority of the person claiming to vote shall have been deposited at the office not less than forty-eight hours before the time appointed for holding the meeting. 79. Subject to the provisions of these Articles, every member either personally or by attorney or in the case of a corporation by a representative and every proxy shall be entitled to be present and to vote at any general meeting and to be reckoned in the quorum thereat in respect of any share or shares upon which all calls due to the Company have been paid. 80. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the meeting whose decision shall be final and conclusive. 81. On a poll votes may be given either personally or by proxy or by attorney or in the case of a corporation by its representative and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way. 82. (1) A member may appoint not more than two proxies to attend and vote at the same general meeting. (2) If the member is a Depositor, the Company shall be entitled:- (i) (ii) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares entered in its Securities Account as at the cut-off time as certified by the Depository to the Company; and to accept as validly cast by the proxy or proxies appointed by the Depositor on a poll that number of votes which corresponds to or is less than the aggregate number of shares entered in its Securities Account of that Depositor as at the cut-off time as certified by the Depository to the Company, whether that number is greater or smaller than the number specified in any instrument of proxy executed by or on behalf of that Depositor. (3) Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy. If no such proportion or number is specified the first named proxy may be treated as representing 100 per cent. of the shareholding and any second named proxy as an alternate to the first named. (4) Voting right(s) attached to any shares in respect of which a member has not appointed a proxy may only be exercised at the relevant general meeting by the member personally or by his attorney, or in the case of a corporation by its representative. 58

61 (5) Where a member appoints a proxy in respect of more shares than the shares standing to his name in the Register of Members, or in the case of a Depositor, standing to the credit of that Depositors Securities Account, such proxy may not exercise any of the votes or rights of the shares not registered to the name of that member in the Register of Members or standing to the credit of that Depositor s Securities Account as at the cut-off time, as the case may be. Proxy need not be a member Instrument appointing a proxy To be left at Company s office Intervening death or insanity of principal not to revoke proxy Corporations acting by representatives 83. A proxy or attorney need not be a member, and shall be entitled to vote on a show of hands on any matter at any general meeting. 84. Any instrument appointing a proxy shall be in writing in the common form approved by the Directors under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, under seal or under the hand of its attorney duly authorised and the Company shall accept as valid in all respects the form of proxy approved by the Directors for use at the date relevant to the general meeting in question. 85. The instrument appointing a proxy, together with the power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certified copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the instrument of proxy and must be left at the office or such other place (if any) as is specified for the purpose in the notice convening the meeting not less than forty-eight hours before the time appointed for the holding of the meeting or adjourned meeting (or in the case of a poll not less than twenty-four hours before the time appointed for the taking of the poll) at which it is to be used failing which the instrument may be treated as invalid. An instrument appointing a proxy shall, unless the contrary is stated thereon, be valid as well for any adjournment of the meeting as for the meeting to which it relates Provided that an instrument of proxy relating to more than one meeting (including any adjournment thereof) having once been so delivered for the purposes of any meeting shall not be required again to be delivered for the purposes of any subsequent meeting to which it relates. An instrument of proxy shall be deemed to include the power to demand or join in demanding a poll on behalf of the appointor. Unless otherwise instructed, a proxy shall vote as he thinks fit. The signature on an instrument appointing a proxy need not be witnessed. 86. A vote given in accordance with the terms of an instrument of proxy (which for the purposes of these Articles shall also include a power of attorney) shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy, or of the authority under which the proxy was executed or the transfer of the share in respect of which the proxy is given, provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received by the Company at the office (or such other place as may be specified for the deposit of Instruments appointing proxies) before the commencement of the meeting or adjourned meeting (or in the case of a poll before the time appointed for the taking of the poll) at which the proxy is used. 87. Any corporation which is a member may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members and the persons so authorised shall be entitled to exercise the same powers on behalf of the corporation as the corporation could exercise if it were an individual member of the Company. The Company 59

62 shall be entitled to treat a certificate under the seal of the corporation as conclusive evidence of the appointment or revocation of appointment of a representative under this Article. 3.3 Outstanding Awards under the Hafary Performance Share Plan. As at the Latest Practicable Date, the Company has granted an aggregate of 1,550,000 Shares which have been awarded but not yet allotted to participants of the Hafary Performance Share Plan. 4. DISCLOSURE OF INTERESTS 4.1 Interests and Dealings of Company in Shares and Convertible Securities of the Offeror. As at the Latest Practicable Date, neither the Company nor its subsidiaries: (a) (b) has any direct or deemed interests in (i) any shares of the Offeror or (ii) convertible securities, warrants, options and derivatives in respect of (i); and has dealt in (i) any shares of the Offeror or (ii) convertible securities, warrants, options and derivatives in respect of (i), during the period commencing six months prior to the Offer Announcement Date and ending on the Latest Practicable Date. 4.2 Interests and Dealings of Directors in Shares and Convertible Securities of the Offeror. As at the Latest Practicable Date, none of the Directors: (a) (b) has any direct or deemed interests in (i) any shares of the Offeror or (ii) convertible securities, warrants, options and derivatives in respect of (i); and has dealt in (i) any shares of the Offeror or (ii) convertible securities, warrants, options and derivatives in respect of (i), during the period commencing six months prior to the Offer Announcement Date and ending on the Latest Practicable Date. 4.3 Interests and Dealings of Directors in Shares and Convertible Securities of the Company. As at the Latest Practicable Date, none of the Directors: (a) (b) save as disclosed below, has any direct or deemed interests in (i) any Shares or (ii) convertible securities, warrants, options and derivatives in respect of (i); and has dealt in (i) any Shares or (ii) convertible securities, warrants, options and derivatives in respect of (i), during the period commencing six months prior to the Offer Announcement Date and ending on the Latest Practicable Date. Interests of Directors in Shares Direct Interest Deemed Interest Number of Number of Shares % Shares % Mr. Low Kok Ann 68,000, Mr. Low See Ching 30,600, ,500, ,000,000 Shares are held in the name of Bank of Singapore Nominees Pte Ltd, 20,000,000 Shares are held in the name of OCBC Securities Private Limited and 32,500,000 Shares are held in the name of Hong Leong Finance Nominees Pte Ltd. These figures have been updated since the date of the Offer Document. 60

63 4.4 Interests and Dealings of the IFA in Shares and Convertible Securities of the Company. As at the Latest Practicable Date, none of the IFA or funds whose investments are managed by the IFA on a discretionary basis: (a) (b) has any direct or deemed interests in (i) any Shares or (ii) convertible securities, warrants, options and derivatives in respect of (i); and has dealt in (i) any Shares or (ii) convertible securities, warrants, options and derivatives in respect of (i), during the period commencing six months prior to the Offer Announcement Date and ending on the Latest Practicable Date. 5. OTHER DISCLOSURES 5.1 Directors Service Contracts. On 27 January 2014, the Company entered into a service agreement with Mr. Low Kok Ann (the Appointee ) (the Service Agreement ) for the appointment of the Appointee as its Executive Chairman and Chief Executive Officer, on the following terms and conditions: (a) the employment period is for an initial minimum period of 3 years commencing on 1 February 2014 and expiring on the date falling 1 day prior to the third anniversary of 1 February 2014, and thereafter for automatic successive renewal periods of 1 year each on such terms and conditions as the Company and the Appointee shall agree; (b) (c) the Company shall pay to the Appointee during the continuance of his employment under the Service Agreement an annual salary of S$240,000 (which sum excludes employers CPF contributions, which shall be paid directly to the CPF by the Company), which shall comprise of a monthly salary of S$20,000; the Company shall pay to the Appointee an annual performance bonus, calculated based on the profit before tax of the Company and its subsidiaries from time to time, before profit sharing and other extraordinary items ( PBT ) as follows: (i) (ii) where PBT is equal to or less than S$3 million, 1.5% of PBT; where PBT is between S$3 million and S$5 million, S$45,000 plus 3.0% of PBT in excess of S$3 million; or (iii) where PBT is in excess of S$5 million, S$105,000 plus 4.5% of PBT in excess of S$5 million; (d) the Service Agreement is subject to termination by the Company (without prejudice to and in addition to any other remedy) by not less than 6 months notice in writing of such termination (during which period the Appointee shall continue to be in the employment of the Company and bound by his obligations under the Service Agreement, but the Company may waive the requirement that the Appointee attend at the office save for handing over requirements), or by giving the Appointee an amount equal to 6 months of the Appointee s last drawn salary in lieu of notice; (e) the Service Agreement may be terminated by the Appointee by giving to the Company 6 months prior written notice of such termination or by paying to the Company an amount equal to 6 months salary in lieu of such notice. Save as disclosed above, there are no service contracts between any Director or proposed Director with the Company or any of its subsidiaries with more than 12 months to run and which cannot be terminated by the employing company within the next 12 months without paying any compensation. In addition, there are no service contracts entered into or amended between any Director or proposed Director, with the Company during the period commencing six months prior to the Offer Announcement Date and ending on the Latest Practicable Date. 61

64 5.2 No Payment or Benefit to Directors. It is not proposed, in connection with the Offer, that any payment or other benefit be made or given to any Director or to any director of any other corporation which is, by virtue of Section 6 of the Act, deemed to be related to the Company as compensation for loss of office or otherwise in connection with the Offer. 5.3 No Agreement Conditional upon Outcome of Offer. Save for the Irrevocable Undertakings given by each of Mr. Low Kok Ann and Mr. Low See Ching, there are no agreements or arrangements made between any Director and any other person in connection with or conditional upon the outcome of the Offer. 5.4 Material Contracts entered into by Offeror. There are no material contracts entered into by the Offeror in which any Director has a material personal interest, whether direct or indirect. 6. FINANCIAL INFORMATION ON THE GROUP 6.1 Introduction. Rule 24.4 of the Code requires the Company to disclose, inter alia, the following information in this Circular: (a) (b) (c) (d) (e) (f) details, for the last three financial years, of turnover, exceptional items, net profit or loss before and after tax, minority interests, net earnings per share and net dividends per share; a statement of the assets and liabilities shown in the last published audited accounts; particulars of all known material changes in the financial position of the Company subsequent to the last published audited accounts or a statement that there are no such known material changes; details relating to items referred to in (a) in respect of any interim statement or preliminary announcement made since the last published audited accounts; significant accounting policies together with any points from the notes of the accounts which are of major relevance for the interpretation of the accounts; and where, because of a change in accounting policy, figures are not comparable to a material extent, this should be disclosed and the approximate amount of the resultant variation should be stated. As at the Latest Practicable Date, the latest published audited accounts of the Group are that for FY2014 published on 26 September 2014 ( Audited FY2014 Results ). The Directors have thus decided to use the Audited FY2014 Results as the last published audited accounts for the purposes of disclosures under Rule 24.4 of the Code, as (i) the Audited FY2014 Results reflect the most recent and accurate financial position of the Company to the Shareholders and as such are more relevant to the Shareholders in order to evaluate the Offer and (ii) as at the Latest Practicable Date, the Audited FY2014 Results are in print and are available to the Shareholders simultaneously with this Circular. The Audited FY2014 Results are reproduced in Appendix 3 to this Circular. 6.2 Consolidated Income Statements. A summary of the audited consolidated income statements of the Group for the past three financial years ended 30 June 2012, 30 June 2013, and 30 June 2014 is set out below. The following summary should be read in conjunction with the audited consolidated financial statements of the Group for the relevant financial periods and the accompanying notes thereto, contained in the Annual Reports of the Company for FY2012, FY2013 and FY2014, which are available for inspection at the registered office of the Company. Please refer to Section 13 of Appendix 1 to this Circular for further information. The Audited FY2014 Results are also reproduced in Appendix 3 to this Circular. 62

65 Audited Audited Audited FY2014 FY2013 FY2012 S S S Revenue 92,745 83,337 63,073 Other Items of Income 10 1,670 24, Other Items of Expense 11 (83,668) (79,417) (57,209) Profit before Income Tax from Continuing 10,747 28,012 6,038 Operations Profit from Continuing Operations, Net of Tax 8,720 22,882 5,070 Other Comprehensive Income, Net of Tax Total Comprehensive Income for the Year 8,720 22,882 5,070 Profit, Net of Tax and Total Comprehensive 8,048 22,328 4,547 Income Attributable to Owners of the Parent Profit, Net of Tax and Total Comprehensive Income Attributable to Non-Controlling Interests Basic and Diluted Earnings Per Share (cents) Net Dividend Per Share (cents) This comprises Interest Income (FY2014) and Other Credits (FY2014, FY2013, FY2012). 11 This comprises Changes in Inventories of Finished Goods, Purchases and Related Costs, Employee Benefits Expense, Depreciation Expense, Impairment Losses, Other Charges, Finance Costs, Other Expenses, Share of Profit (Loss) from Equity-Accounted Associates (FY2014, FY2013, FY2012), and Share of Profit from an Equity-Accounted Joint Venture (FY2014, FY2013). 12 Net Dividend Per Share is computed by dividing the dividend declared / approved during each financial year by the weighted average number of ordinary shares outstanding during that financial year. 63

66 6.3 Consolidated Balance Sheets. A summary of the audited consolidated balance sheets of the Group as at 30 June 2014 and as at 30 June 2013 is set out below. The following summary should be read in conjunction with the Audited FY2014 Results and the accompanying notes thereto, which are reproduced in Appendix 3 to this Circular. Audited Audited As at 30 June 2014 As at 30 June 2013 Non-Current Assets 77,031 55,145 Current Assets 77,303 80,842 Total Assets 154, ,987 Share Capital 26,634 26,634 Retained Earnings 11,015 18,042 Non-Controlling Interests 2,635 2,075 Total Equity 40,284 46,751 Non-Current Liabilities 37,390 17,619 Current Liabilities 76,660 71,617 Total Liabilities 114,050 89,236 Total Equity and Liabilities 154, , MATERIAL CHANGES IN FINANCIAL POSITION As at Latest Practicable Date, save as disclosed in the Audited FY2014 Results and any other information on the Group which is publicly available (including without limitation, the announcements released by the Group on the SGXNet), there have been no material changes to the financial position of the Group since 30 June 2014, being the date of the last audited accounts of the Group. 8. SIGNIFICANT ACCOUNTING POLICIES AND CHANGES IN ACCOUNTING POLICIES 8.1 Significant Accounting Policies A summary of the significant accounting policies of the Group is set out in Note 2 of the Audited FY2014 Results, which is reproduced in Appendix 3 to this Circular. Save as disclosed in Note 2 of the Audited FY2014 Results, there are no significant accounting policies or any matter from such notes, which are of any major relevance for the interpretation of the accounts of the Group referred to in this Circular. 8.2 No Change in Accounting Policies Save as disclosed in Note 2 of the Audited FY2014 Results, there is no change in the accounting policies of the Group which would cause the financial information disclosed in this Circular not to be comparable to a material extent. 9. VALUATION OF THE PROPERTIES The Company had conducted independent valuations of the Properties as at 30 September 2014 and the Valuation Summary Letters and Valuation Certificates are set out in Appendix 4 to this Circular. The full valuation reports on the Properties are available for inspection at the registered office of the Company. 64

67 Under Rule 26.3 of the Code, the Company is required, inter alia, to make an assessment of any potential tax liability which would arise if the assets, which are the subject of a valuation given in connection with an offer, were to be sold at the amount of valuation. Based on the assessed valuations of the Properties as reported in the respective valuation reports, the potential tax liabilities that may be incurred by the Group on the hypothetical disposal of the Properties at the amount of the valuations is estimated at approximately S$1.41 million. The aforesaid tax liabilities will not crystallise if the Group does not dispose of its interests in the Properties. As at the Last Practicable Date, the Company has no immediate plans to dispose of its interests in the Properties, and as such, the aforesaid tax liabilities are not likely to crystallise. 10. MATERIAL CONTRACTS WITH INTERESTED PERSONS As at the Latest Practicable Date, neither the Company nor any of its subsidiaries have entered into any material contracts with interested persons (other than those entered into in the ordinary course of business) during the period commencing three (3) years before 30 December 2014, being the Offer Announcement Date, and ending on the Latest Practicable Date. For completeness, as disclosed in the public announcements made by the Company via SGXNet and the Annual Reports of the Company for FY2010, FY2011, FY2012, the Group had entered into several interested person transactions in the ordinary course of its business during the period commencing three (3) years before 30 December 2014, being the Offer Announcement Date, and ending on the Latest Practicable Date. An interested person, as defined in the Note on Rule 24.6 read with the Note on Rule of the Code, is: (a) (b) (c) (d) (e) (f) a director, chief executive officer, or substantial shareholder of the Company; the immediate family of a director, the chief executive officer, or a substantial shareholder (being an individual) of the Company; the trustees, acting in their capacity as such trustees, of any trust of which a director, the chief executive officer or a substantial shareholder (being an individual) and his immediate family is a beneficiary; any company in which a director, the chief executive officer or a substantial shareholder (being an individual) and his immediate family together (directly or indirectly) have an interest of 30 per cent. or more; any company that is the subsidiary, holding company or fellow subsidiary of the substantial shareholder (being a company); or any company in which a substantial shareholder (being a company) and any of the companies listed in (e) above together (directly or indirectly) have an interest of 30 per cent. or more. 11. MATERIAL LITIGATION As at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any material litigation or arbitration proceedings, as plaintiff or defendant, which might materially and adversely affect the financial position of the Company and its subsidiaries, taken as a whole. As at the Latest Practicable Date, the Directors are not aware of any litigation, claim or proceedings pending or threatened against the Company or any of its subsidiaries or of any fact likely to give rise to any litigation, claims or proceedings which might materially and adversely affect the financial position of the Company and its subsidiaries, taken as a whole. 65

68 12. GENERAL 12.1 Costs and Expenses. All expenses and costs incurred by the Company in relation to the Offer will be borne by the Company Consent of the IFA. TCMPL has given and has not withdrawn its written consent to the issue of this Circular with the inclusion herein of the IFA Letter and references to its name and the IFA Letter, in the form and context in which they appear in this Circular Consent of the Valuers. The Valuers have given and have not withdrawn their written consent to the issue of this Circular with the inclusion of (i) their names, (ii) the Valuation Summary Letters and Valuation Certificates set out in Appendix 4 to this Circular, and (iii) all references thereto in the form and context in which they appear in this Circular. 13. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection at the registered office of the Company at 105 Eunos Avenue 3, Hafary Centre, Singapore during normal business hours for the period which the Offer remains open for acceptance: (a) (b) (c) (d) (e) (f) (g) the Memorandum and Articles of Association of the Company; the Annual Reports of the Company for FY2012, FY2013 and FY2014; the IFA Letter; the Valuation Summary Letters and Valuation Certificates; the full valuation reports on the Properties; the letters of consent referred to in Section 12.2 and Section 12.3 of Appendix 1 to this Circular above; and the announcement referred to in Section 3.1 of Appendix 1 to this Circular above. 14. MARKET QUOTATION 14.1 Closing Prices of the Shares. As stated in Section 3.1 of Appendix 9 to the Offer Document, the closing prices of the Shares on the SGX-ST (as reported by Bloomberg L.P.) on (i) the latest practicable date of the Offer Document was S$0.220, (ii) 29 December 2014 (being the last Market Day on which the Shares were traded on the SGX-ST immediately preceding the Offer Announcement Date) was S$0.225, and (iii) 30 December 2014 (being the Offer Announcement Date) was S$ The last transacted prices and aggregate trading volume of the Shares on the SGX-ST on a monthly basis from June 2014 to November 2014 (being the six calendar months preceding the Offer Announcement Date), as reported by Bloomberg L.P., are reproduced from the information contained in Section 3.1 of Appendix 9 to the Offer Document and set out below: 66

69 Month Last Transacted Price Volume of Shares Traded (S$) June ,399,000 July ,659,000 August ,364,000 September ,308,000 October ,391,000 November ,939, Highest and Lowest Prices. As stated in Section 3.2 of Appendix 9 to the Offer Document, during the period between the start of the six months preceding the Offer Announcement Date and the latest practicable date of the Offer Document, the highest and lowest closing prices of the Shares on the SGX-ST, as reported by Bloomberg L.P. are as follows: (a) highest closing price: S$0.235 on 7 November 2014; and (b) lowest closing price: S$0.178 on 30 June 2014, 9 July 2014, 10 July 2014 and 22 July

70 APPENDIX 2 ADDITIONAL INFORMATION ON THE OFFEROR AND HSCB The following information on the Offeror and HSCB as set out in Appendix 3 and Appendix 4 to the Offer Document respectively has been extracted from the Offer Document and reproduced in italics below. APPENDIX 3 INFORMATION ON THE OFFEROR 1. DIRECTORS The names, addresses and descriptions of the directors of the Offeror as at the Latest Practicable Date are as follows: Name Address Description Ms Cheah Yee Leng 21st Floor Director Menara Hap Seng Jalan P. Ramlee Kuala Lumpur Datuk Edward Lee Ming Foo No. 43 Director Jalan PJU1A/36 Ara Damansara Petaling Jaya Selangor Darul Ehsan Mr Chan Kien Ming 138 Hillview Avenue Director #07-01 Hillview Residence Singapore PRINCIPAL ACTIVITIES The Offeror is a company incorporated in Singapore on 24 November 2014 and its principal activity is that of an investment holding company. It has an issued and paid-up share capital of S$1.00 comprising one ordinary share. It is a direct wholly-owned subsidiary of HSCB. 3. FINANCIAL INFORMATION As the Offeror was incorporated on 24 November 2014, no audited financial statements of the Offeror have been prepared since the Latest Practicable Date. 4. MATERIAL CHANGES IN FINANCIAL POSITION As at the Latest Practicable Date, save as a result of making and financing the Partial Offer, there has been no material changes to the financial position of the Offeror subsequent to the date of its incorporation. 5. REGISTERED OFFICE The registered office of the Offeror is at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore

71 APPENDIX 4 INFORMATION ON HSCB 1. DIRECTORS The names, addresses and descriptions of the directors of the Offeror as at the Latest Practicable Date are as follows: Name Address Description Dato Jorgen Bornhoft 21st Floor Independent Non-Executive Menara Hap Seng Chairman Jalan P. Ramlee Kuala Lumpur Datuk Edward Lee Ming Foo No. 43 Managing Director Jalan PJU1A/36 Ara Damansara Petaling Jaya Selangor Darul Ehsan Mr Lee Wee Yong No. 6 Executive Director Jalan PJU1A/29B Ara Damansara Petaling Jaya Selangor Darul Ehsan Ms Cheah Yee Leng 21st Floor Executive Director Menara Hap Seng Jalan P. Ramlee Kuala Lumpur Datuk Shim Kong Yip TB3169, Taman Fook An Non-Independent Mile 2 3/4 Jalan Sin Onn Non-Executive Director Tawau Sabah Ch ng Kok Phan No. 8, Wangjing Road Non-Independent LSH Plaza, Daimler Tower Non-Executive Director 8th Floor, Chaoyang District Beijing P.R. China Lt. Gen (R) Datuk Abdul No. 18, Jalan SS 5B/3 Independent Non-Executive Aziz bin Hasan Taman Kelana Jaya Director Petaling Jaya Selangor Darul Ehsan Dato Mohammed Bin 35, Jalan 12 Independent Non-Executive Haji Che Hussein Taman Tun Abdul Razak Director Ampang Selangor Darul Ehsan Mr. Tan Ghee Kiat 7, Jalan Turi Independent Non-Executive Bukit Bandaraya Director Kuala Lumpur 69

72 2. PRINCIPAL ACTIVITIES HSCB is a company incorporated in Malaysia and listed on the Main Board of Bursa Malaysia Securities Berhad with diversified businesses in plantations, property investment and development, credit financing, trading of fertilizers and automotive, as well as building materials and stone quarries. 3. FINANCIAL INFORMATION Set out below are certain financial information extracted from HSCB Group s audited consolidated financial statements for FY2011, FY2012 and FY2013 and HSCB Group s unaudited interim consolidated financial statements for 3Q2014 (the HSCB 3Q2014 Financial Statements and collectively, the HSCB Financial Statements ). Such financial information should be read in conjunction with the HSCB Financial Statements and the accompanying notes as set out therein. Unaudited 9 months ended 30 Audited Audited Audited September 2014 FY2013 FY2012 FY2011 RM 000 RM 000 RM 000 RM 000 Revenue 2,784,782 3,486,747 3,958,899 3,628,380 Other non-operating items 415,508 (2,175) Profit before tax 787, , , ,894 Profit after tax 610, , , ,022 Non-controlling interests 45,570 47,585 63, ,525 Profit attributable to owners of 565, , , ,497 the Company Basic earnings per share (sen) Dividends per share (sen) The audited consolidated balance sheet of HSCB Group as at 31 December 2013 (the HSCB FY2013 Balance Sheet ) and the unaudited consolidated balance sheet of the HSCB Group as at 30 September 2014 (the HSCB 3Q2014 Balance Sheet ) which are extracted from the HSCB 3Q2014 Financial Statements are set out in Appendix 6. The HSCB FY2013 Balance Sheet and the HSCB 3Q2014 Balance Sheet should be read in conjunction with the audited consolidated financial statements for FY2013 and the accompanying notes as set out in the HSCB Annual Report and the HSCB 3Q2014 Financial Statements and the accompanying notes as set out in the HSCB 3Q2014 Financial Statements respectively. 4. MATERIAL CHANGES IN FINANCIAL POSITION As at the Latest Practicable Date, save as (i) a result of the making and financing of the Partial Offer and (ii) otherwise disclosed in any information on HSCB Group that is publicly available, there have been no material changes to the financial position of HSCB Group since 31 December 2013, being the date of the last published audited accounts of HSCB Group.. 5. SIGNIFICANT ACCOUNTING POLICIES The HSCB FY2013 Financial Statements have been prepared in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. 70

73 The significant accounting policies of HSCB reproduced from the HSCB Annual Report are set out in Appendix 7 to this Offer Document. 6. CHANGES IN ACCOUNTING POLICIES There have been no changes to the significant accounting policies of HSCB Group since the date of the HSCB FY2013 Financial Statements, which will cause the figures set out in paragraph 3 above and Appendix 6 to this Offer Document to be not comparable to a material extent. 7. REGISTERED OFFICE The registered office of HSCB is at 21st Floor, Menara Hap Seng, Jalan P. Ramlee, Kuala Lumpur, Malaysia. 71

74 APPENDIX 3 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR FY2014 The information set out in this Appendix 3 is a reproduction of selected financial information extracted from the Annual Report for FY2014, and was not specifically prepared for inclusion in this Circular. 72

75 DIRECTORS REPORT company and of the group for the reporting year ended 30 June DIRECTORS AT DATE OF REPORT Low Kok Ann Low See Ching Ong Beng Chye Terrance Tan Kong Hwa Chow Wen Kwan Marcus 2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES Neither at the end of the reporting year nor at any time during the reporting year did there subsist any arrangement debentures in the company or any other body corporate. 3. DIRECTORS INTERESTS IN SHARES AND DEBENTURES the company and related corporations as recorded in the register of directors shareholdings kept by the company under section 164 of the Companies Act, Chapter 50 ( the Act ) except as follows: Name of directors and companies in which interests are held The company Direct interests At beginning of the reporting year At end of the reporting year Deemed interests At beginning of the reporting year Number of shares of no par value At end of the reporting year Low Kok Ann 68,000,000 68,000,000 Low See Ching 30,600,000 30,600,000 92,500,000 92,500,000 By virtue of section 7 of the Act, Low Kok Ann and Low See Ching are deemed to have an interest in all the related corporations of the company. The directors interests as at 21 July 2014 were the same as those at the end of the reporting year. 4. CONTRACTUAL BENEFITS OF DIRECTORS Since the beginning of the reporting year, no director of the company has received or become entitled to receive a HAFARY Holdings Limited Annual Report 2014 in which certain directors have an interest. 73

76 DIRECTORS REPORT 5. SHARE OPTIONS During the reporting year, no option to take up unissued shares of the company or any subsidiary was granted. During the reporting year, there were no shares of the company or any subsidiary issued by virtue of the exercise of an option to take up unissued shares. At the end of the reporting year, there were no unissued shares of the company or any subsidiary under option. 6. AUDIT COMMITTEE The members of the audit committee at the date of this report are as follows: Ong Beng Chye Terrance Tan Kong Hwa Chow Wen Kwan Marcus (Chairman of Audit Committee and Lead Independent Director) (Independent Director) (Independent Director) performed the following: evaluation of the adequacy of the group s system of internal accounting controls; company for adoption; and Exchange Securities Trading Limited). The audit committee also meets with internal and external auditors without the presence of management at least Other functions performed by the audit committee are described in the Corporate Governance Statement included in and independence are safeguarded where the independent external auditors provide non-audit services. The audit committee has recommended to the board of directors that the independent auditors, RSM Chio Lim LLP, be nominated for re-appointment as independent external auditors at the next annual general meeting of the company. 7. INDEPENDENT AUDITORS The independent auditors, RSM Chio Lim LLP, have expressed their willingness to accept re-appointment. 8. DIRECTORS OPINION ON THE ADEQUACY OF INTERNAL CONTROLS Based on the internal controls established and maintained by the company, work performed by the internal and external auditors, and reviews performed by management, other committees of the board and the board, the audit compliance risks, are adequate as at the end of the reporting year 30 June

77 DIRECTORS REPORT 9. SUBSEQUENT DEVELOPMENTS On Behalf of The Directors. Low Kok Ann Director. Low See Ching Director 26 September 2014 HAFARY Holdings Limited Annual Report

78 STATEMENT BY DIRECTORS In the opinion of the directors, (b) as to give a true and fair view of the state of affairs of the company and of the group as at 30 June 2014 and of the then ended; and at the date of this statement, there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due. On Behalf of The Directors Low Kok Ann Director Low See Ching Director 26 September

79 INDEPENDENT AUDITOR S REPORT REPORT ON THE FINANCIAL STATEMENTS information. MANAGEMENT S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS provisions of the Singapore Companies Act, Chapter 50 ( the Act ) and Singapore Financial Reporting Standards, and for are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they AUDITOR S RESPONSIBILITY accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and misstatement. design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation HAFARY Holdings Limited Annual Report

80 INDEPENDENT AUDITOR S REPORT OPINION of changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at for the reporting year ended on that date. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In our opinion, the accounting and other records required by the Act to be kept by the company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. RSM Chio Lim LLP Public Accountants and Chartered Accountants Singapore 26 September 2014 Partner-in-charge of audit: Woo E-Sah Effective from the reporting year ended 30 June

81 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Notes Revenue 5 92,745 83,337 Other Items of Income Interest Income 6 23 Other Credits 7 1,647 24,092 Other Items of Expense Changes in Inventories of Finished Goods 6,437 5,184 Purchases and Related Costs (63,888) (54,757) 8 (12,923) (13,093) Depreciation Expense 16, 17 (2,661) (1,423) Impairment Losses 9 (344) (4,728) Other Charges 7 (605) (335) Finance Costs 10 (1,784) (1,207) Other Expenses 11 (8,733) (7,315) (1,833) ,747 28,012 Income Tax Expense 12 (2,027) (5,130) 8,720 22,882 Other Comprehensive Income, Net of Tax Total Comprehensive Income for the Year 8,720 22,882 Total Comprehensive Income Attributable to: - Owners of the Parent 8,048 22,328 - Non-Controlling Interests ,720 22,882 Cents Cents Basic and Diluted Earnings Per Share HAFARY Holdings Limited Annual Report

82 STATEMENTS OF FINANCIAL POSITION As at 30 June 2014 Group Company Notes ASSETS Non-Current Assets Property, Plant and Equipment 16 67,239 52, Other Asset, Non-Current 17 4,771 Investments in Subsidiaries 19 9,239 9,239 Investments in Associates 20 3,496 2,861 Investments in Joint Ventures Other Financial Asset 22 1,247 1,247 Total Non-Current Assets 77,031 55,145 10,888 9,427 Current Assets Inventories 23 41,356 35,054 Trade and Other Receivables 24 26,820 29,969 25,839 34,413 Derivative Financial Instruments Other Assets, Current 25 4,270 6, Cash and Cash Equivalents 26 4,857 9, ,051 Total Current Assets 77,303 80,842 25,972 36,505 Total Assets 154, ,987 36,860 45,932 EQUITY AND LIABILITIES Equity Share Capital 27 26,634 26,634 26,634 26,634 Retained Earnings 11,015 18,042 1,393 11,139 Equity, Attributable to Owners of the Parent 37,649 44,676 28,027 37,773 Non-Controlling Interests 2,635 2,075 Total Equity 40,284 46,751 28,027 37,773 Non-Current Liabilities Deferred Tax Liabilities Other Financial Liabilities 28 36,941 17, Total Non-Current Liabilities 37,390 17, Current Liabilities Provision Income Tax Payable 5,716 5, Trade and Other Payables 30 14,944 18,183 8,624 7,986 Other Financial Liabilities 28 54,701 47, Other Liabilities Derivative Financial Instruments Total Current Liabilities 76,660 71,617 8,668 8,058 Total Liabilities 114,050 89,236 8,833 8,159 Total Equity and Liabilities 154, ,987 36,860 45,932 80

83 STATEMENTS OF CHANGES IN EQUITY Attributable Non- Total to Parent Share Retained Controlling Group: Equity Subtotal Capital Earnings Interests Current Year: Opening Balance at 1 July ,751 44,676 26,634 18,042 2,075 Movements in Equity: 8,720 8,048 8, Acquisition of a Non-Controlling Interest Without a Change in Control (60) (60) 60 Dividends Paid (Note 15) (15,015) (15,015) (15,015) Dividends Paid to Non-Controlling Interests (172) (172) Closing Balance at 30 June ,284 37,649 26,634 11,015 2,635 Previous Year: Opening Balance at 1 July ,005 31,304 20,875 10,429 1,701 Movements in Equity: 22,882 22,328 22, Dividends Paid (Note 15) (14,715) (14,715) (14,715) Dividends Paid to Non-Controlling Interests (180) (180) Issue of Shares (Note 27) 5,880 5,880 5,880 Share Issue Expenses (Note 27) (121) (121) (121) Closing Balance at 30 June ,751 44,676 26,634 18,042 2,075 HAFARY Holdings Limited Annual Report

84 STATEMENTS OF CHANGES IN EQUITY Total Share Retained Company: Equity Capital Earnings Current Year: Opening Balance at 1 July ,773 26,634 11,139 Movements in Equity: 5,269 5,269 Dividends Paid (Note 15) (15,015) (15,015) Closing Balance at 30 June ,027 26,634 1,393 Previous Year: Opening Balance at 1 July ,019 20,875 3,144 Movements in Equity: 22,710 22,710 Dividends Paid (Note 15) (14,715) (14,715) Issue of Shares (Note 27) 5,880 5,880 Share Issue Expenses (Note 27) (121) (121) Closing Balance at 30 June ,773 26,634 11,139 82

85 CONSOLIDATED STATEMENT OF CASH FLOWS Cash Flows From Operating Activities 10,747 28,012 Interest Expense 1,784 1,207 Interest Income (23) (635) 1,833 (198) (90) Depreciation of Property, Plant and Equipment 2,628 1,423 Depreciation of Other Asset, Non-Current 33 Impairment Loss on Investment in an Associate 4,020 Gain on Disposal of Development Property (85) (23,762) Loss (Gain) on Disposal of Property, Plant and Equipment 304 (64) Gain on Disposal of Subsidiary (1,000) Fair Value Gain on Other Financial Asset (189) Fair Value Losses (Gains) on Derivative Financial Instruments 301 (240) Net Effect of Exchange Rate Changes In Consolidating Subsidiary (7) Operating Cash Flows Before Changes in Working Capital 13,660 12,339 Inventories (6,302) (4,813) Trade and Other Receivables (1,944) (6,272) Other Assets, Current 1,202 (4,326) Cash Restricted in Use (82) Provision Trade and Other Payables 3,555 2,139 Other Liabilities 234 (73) Net Cash Flows From (Used in) Operations 10,364 (954) Income Taxes Paid (1,423) (359) Net Cash Flows From (Used in) Operating Activities 8,941 (1,313) HAFARY Holdings Limited Annual Report

86 CONSOLIDATED STATEMENT OF CASH FLOWS Cash Flows From Investing Activities Purchase of Property, Plant and Equipment (Note 26B) (17,949) (21,526) Purchase of Other Asset, Non-Current (4,804) Proceeds From Disposal of Property, Plant and Equipment Payments for Development Property Costs (8,539) Progress Payments Received From Sale of Development Property 6,528 35,163 Investment in an Associate (2,819) Investments in Joint Ventures (100) Investment in Other Financial Asset, Non-Current (1,058) Proceeds from Disposal of Subsidiary (Note 13) 1,000 Loan to Associate (1,269) Dividend Income from Joint Venture Interest Received 1 Net Cash Flows (Used in) From Investing Activities (17,238) 2,400 Cash Flows From Financing Activities Dividends Paid to Equity Owners (21,450) (8,280) Dividends Paid to Non-Controlling Interests (172) (180) (Decrease) Increase in Trust Receipts and Bills Payable (6,573) 7,616 Repayment of Finance Lease Liabilities (284) (263) Proceeds From New Bank Loans 51,817 22,655 Repayment of Bank Loans (18,067) (22,267) Issue of Shares 5,759 Interest Expense Paid (1,782) (1,528) Net Cash Flows From Financing Activities 3,489 3,512 Net (Decrease) Increase in Cash and Cash Equivalents (4,808) 4,599 Cash and Cash Equivalents, Beginning Balance 9,583 4,984 Cash and Cash Equivalents, Ending Balance (Note 26A) 4,775 9,583 84

87 NOTES TO THE FINANCIAL STATEMENTS 30 June GENERAL dollars ( $ ) and they cover the company (referred to as parent ) and the subsidiaries. by directors. The company is an investment holding company. It is listed on the Mainboard of the Singapore Exchange Securities Trading Limited. The principal activities of subsidiaries are described in Note 19 below. in Singapore. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Convention ( FRS ) and the related Interpretations to FRS ( INT FRS ) as issued by the Singapore Accounting Standards Council historical cost convention except where an FRS requires an alternative treatment (such as fair values) as disclosed of applying them is immaterial. The disclosures required by FRSs need not be made if the information is immaterial. comprehensive income in the current or previous periods. Basis of Presentation are presented as those of a single economic entity and are prepared using uniform accounting policies for like include the income and expenses of a subsidiary from the date the entity gains control until the date when the entity ceases to control the subsidiary. Income and expenses of the subsidiary are based on the amounts of the assets Changes in the group s ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity as transactions with owners in their capacity as owners. The carrying amounts of the group s and group loses control of a subsidiary it derecognises the assets and liabilities and related equity components of the is measured at its fair value at the date when control is lost and is subsequently accounted as available-for-sale HAFARY Holdings Limited Annual Report 2014 is not presented. 85

88 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Basis of Preparation of the Financial Statements management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses during the reporting year. Actual results could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has Revenue Recognition rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from rendering of services that are of short duration is recognised when the services are completed. Revenue from sale of goods which require installation is recognised by reference to the stage of completion of the transaction at the end of the reporting year determined by the proportion of the costs incurred to date to the estimated total costs of the transaction and the amount of revenue, stage of completion, and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Rental revenue is recognised on a time-proportion basis that takes into account the effective yield on the asset on a straight-line basis over the lease term. Dividend from equity instruments is recognised as income when the entity s right to receive payment is established. Interest revenue is recognised using the effective interest method. Revenue from sale of units in development property is recognised in accordance with the accounting policy on development property (see below). Segment Reporting regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. performance and deciding how to allocate resources to operating segments. absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur. A liability for bonuses is recognised where the entity is contractually obliged or where there is constructive obligation based on past practice. 86

89 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Income Tax The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events tax liabilities and assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Tax expense (tax income) is the aggregate amount included or loss, the current tax and deferred tax are recognised (a) in other comprehensive income if the tax is related to an item recognised in other comprehensive income and (b) directly in equity if the tax is related to an item recognised directly in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each end of the reporting year and be realised. A deferred tax amount is recognised for all temporary differences, unless the deferred tax amount arises from the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at A deferred tax liability or asset is recognised for all taxable temporary differences associated with investments in of the reversal of the taxable temporary difference and it is probable that the taxable temporary difference will not reverse in the foreseeable future or for deductible temporary differences, they will not reverse in the foreseeable Foreign Currency Transactions operates. Transactions in foreign currencies are recorded in the functional currency at the rates ruling at the dates of the transactions. At each end of the reporting year, recorded monetary balances and balances measured at fair value that are denominated in non-functional currencies are reported at the rates ruling at the end of the reporting The presentation is in the functional currency. Translation of Financial Statements of Other Entities denominated in other currencies are translated at end of the reporting year rates of exchange and the income and other comprehensive income and accumulated in a separate component of equity until the disposal of that relevant reporting entity. Subsidiaries HAFARY Holdings Limited Annual Report 2014 A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the reporting its activities accompanying a shareholding of more than one half of the voting rights or the ability to appoint or board of directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying value and the net book value of the investment in a subsidiary are not necessarily indicative of the amounts that would be realised in a current market exchange. 87

90 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Associates An investment in an associate includes goodwill on acquisition, which is accounted for in accordance with FRS 103 Business Combinations. However the entire carrying amount of the investment is tested under FRS 36 for impairment, by comparing its recoverable amount (higher of value in use and fair value) with its carrying amount, whenever application of the requirements in FRS 39 indicates that the investment may be impaired. The carrying value and the net book value of the investment in the associate are not necessarily indicative of the amounts that would be realised in a current market exchange. comprehensive income. Losses of an associate in excess of the reporting entity s interest in the relevant associate to the extent of unrelated reporting entity s interests in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates are changed where necessary to ensure consistency with the policies adopted by the reporting entity. The reporting entity discontinues the use of the equity method from the date that when its investment ceases to be an associate or loss. Any investment retained in the former associate is measured at fair value at the date that it ceases to be an associate. there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying value and the net book value of an investment in the associate are not necessarily indicative of the amounts that would be realised in a current market exchange. Joint Ventures indicative of the amounts that would be realised in a current market exchange. The reporting entity discontinues the venture in excess of the group s interest in the relevant entity are not recognised except to the extent that the group venture. been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss amount that would be realised in a current market exchange. Business Combinations Business combinations are accounted for by applying the acquisition method. There were no acquisitions of business combination during the reporting year. 88

91 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Non-Controlling Interests The non-controlling interests in the net assets and net results of a consolidated subsidiary are shown separately controlling interest in the acquiree (subsidiary) is initially measured either at fair value or at the non-controlling and each component of other comprehensive income are attributed to the owners of the parent and to the noncontrolling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling Borrowing Costs Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. The interest expense is calculated using the effective interest rate method. Borrowing costs are recognised as an expense in the period in which they are incurred except that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Development Property A development property is property being constructed or developed for sale. The cost of property under development costs and other related expenditure. Borrowing costs payable on loans funding a development property are also of development. The cumulative impact of a revision in estimates is recorded in the period such revisions become likely and estimable. Development property is carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less costs to completion and related selling expenses. Revenue rewards of ownership are transferred to the buyer. Goodwill date measured as the excess of (a) over (b); (a) being the aggregate of: (i) the consideration transferred which generally requires acquisition-date fair value; (ii) the amount of any non-controlling interest in the acquiree measured in accordance with FRS 103 (measured either at fair value or as the non-controlling interest s proportionate share of value of the acquirer s previously held equity interest in the acquiree; and (b) being the net of the acquisition-date After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised. Irrespective of whether there is any indication of impairment, goodwill impairment at least annually. Goodwill impairment is not reversed in any circumstances. HAFARY Holdings Limited Annual Report 2014 For the purpose of impairment testing and since the acquisition date of the business combination, goodwill is synergies of the combination, irrespective of whether other assets or liabilities of the acquiree were assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes and is not larger than a segment. 89

92 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Leases Whether an arrangement is, or contains, a lease, it is based on the substance of the arrangement at the inception of the minimum lease payments, each measured at the inception of the lease. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine, the lessee s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over the recorded lease liability are treated periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the reporting years in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of loss as an integral part of the total lease expense. payments are not on that basis. Initial direct cost incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. Property, Plant and Equipment Depreciation is provided on a straight-line basis to allocate the gross carrying amounts of the assets less their residual values over their estimated useful lives of each part of an item of these assets. The annual rates of depreciation are as follows: Leasehold properties Over the terms of lease, that are from 2% to 8% Plant and equipment 10% to 33% Motor vehicles 20% to 25% An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Property, plant and equipment are carried at cost on initial recognition and after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for Cost also includes acquisition cost, borrowing cost capitalised and any cost directly attributable to bringing the asset or component to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are recognised as an asset only when it is probable that future economic Land Use Right Land use right is initially measured at cost. Following initial recognition, land use right is measured at cost less accumulated amortisation and accumulated impairment losses. The land use right is amortised over the remaining lease terms of 37 years, which is 3% per annum. 90

93 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Impairment of Non-Financial Assets Irrespective of whether there is any indication of impairment, an annual impairment test is performed at the same amount. The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in disposal and its value in use. When the fair value less costs of disposal method is used, any available recent market transactions are taken into consideration. When the value in use method is adopted, in assessing the value in use, loss recognised in prior periods are assessed for possible reversal of the impairment. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been measured, net of depreciation or amortisation, if no impairment loss had been recognised. Inventories Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. A write down on cost is made where the cost is not recoverable or if the selling prices have declined. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Financial Assets Initial recognition, measurement and derecognition: or loss are expensed immediately. The transactions are recorded at the trade date. substance over form based on the derecognition test prescribed by FRS 39 relating to the transfer of risks and recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. HAFARY Holdings Limited Annual Report

94 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Financial Assets (Cont d) Subsequent measurement: FRS 39 is as follows: principally for the purpose of selling or repurchasing in the near term (trading assets) or are derivatives category because the conditions are met to use the fair value option and it is used. All changes in fair end of the reporting year. payments that are not quoted in an active market. Assets that are for sale immediately or in the near term are (except that short-duration receivables with no stated interest rate are normally measured at original invoice the use of an allowance account) for impairment or uncollectibility. Impairment charges are provided only that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an estimated. The methodology ensures that an impairment loss is not recognised on the initial recognition of an asset. Losses expected as a result of future events, no matter how likely, are not recognised. For impairment, the carrying amount of the asset is reduced through use of an allowance account. The amount of the loss an event occurring after the impairment loss was recognised. Typically, trade and other receivables are : this category. : this category. Cash and Cash Equivalents Cash and cash equivalents include bank and cash balances, on demand deposits and any highly liquid debt instruments purchased with an original maturity of three months or less. For the consolidated statement of cash demand that form an integral part of cash management. Hedging The entity is exposed to currency and interest rate risks. The policy is to reduce currency exposures through derivatives and other hedging instruments. From time to time, there may be foreign exchange arrangements or and liabilities. The gain or loss from remeasuring these hedging or other arrangement instruments at fair value are 92

95 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Derivatives All derivatives are initially recognised and subsequently carried at fair value. Accounting for derivatives engaged in hedging relationships is described in the above section. Certain derivatives are entered into in order to hedge some transactions and all the strict hedging criteria prescribed by FRS 39 are not met. In those cases, even though the transaction has its economic and business rationale, hedge accounting cannot be applied. As a result, changes accounting policies. Financial Liabilities Initial recognition, measurement and derecognition: or loss are expensed immediately. The transactions are recorded at the trade date. Financial liabilities including bank the liability for at least 12 months after the end of the reporting year. Subsequent measurement: under FRS 39 is as follows: principally for the purpose of selling or repurchasing in the near term (trading liabilities) or are derivatives category because the conditions are met to use the fair value option and it is used. Financial guarantee of (a) the amount measured in accordance with FRS 37 and (b) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with FRS 18. All changes in fair value relating residual category. These liabilities are carried at amortised cost using the effective interest method. Trade trade and other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty and settlement is short-term. Fair Value Measurement Fair value is taken to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, an exit price). It is a market-based that market participants would use when pricing the asset or liability under current market conditions, including into account as relevant when measuring fair value. In making the fair value measurement, management determines combination with other assets or on a stand-alone basis; (c) the market in which an orderly transaction would take place for the asset or liability; and (d) the appropriate valuation techniques to use when measuring fair value. The valuation techniques used maximise the use of relevant observable inputs and minimise unobservable inputs. These inputs are consistent with the inputs a market participant may use when pricing the asset or liability. HAFARY Holdings Limited Annual Report

96 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Fair Value Measurement (Cont d) The fair value measurements and related disclosures categorise the inputs to valuation techniques used to measure fair value by using a fair value hierarchy of three levels. These are recurring fair value measurements unless stated. markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The level is measured on the basis of measured at fair value has a bid price and an ask price, the price within the bid-ask spread or mid-market pricing that is most representative of fair value in the circumstances is used to measure fair value regardless of where the input is categorised within the fair value hierarchy. If there is no market, or the markets available are not active, the fair value is established by using an acceptable valuation technique. Equity Equity instruments are contracts that give a residual interest in the net assets of the reporting entity. Ordinary shares costs directly attributable to the transaction. Dividends on equity are recognised as liabilities when they are declared. Interim dividends are recognised when declared by the directors. Provisions A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past and a reliable estimate can be made of the amount of the obligation. A provision is made using best estimates of the amount required in settlement and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that Government Grants A government grant is recognised at fair value when there is reasonable assurance that the conditions attaching to it income over the periods necessary to match them with the related costs that they are intended to compensate, on a systematic basis. A grant related to depreciable assets is allocated to income over the period in which such assets 94

97 NOTES TO THE FINANCIAL STATEMENTS 30 June SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Critical Judgements, Assumptions and Estimation Uncertainties are discussed below. These estimates and assumptions are periodically monitored to ensure they incorporate all Net realisable value of inventories: A review is made on inventory for excess inventory and declines in net realisable value below cost and an allowance is recorded against the inventory balance for any such declines. The review requires management to consider the future demand for the products. In any case, the realisable value represents the best estimate of the recoverable amount and is based on the acceptable evidence available at the end of the reporting year and inherently involves estimates regarding the future expected realisable value. The usual considerations for determining the amount of allowance or write-down include ageing analysis, technical assessment and subsequent events. In general, such end of the reporting year. Possible changes in these estimates could result in revisions to the stated value of the inventories. The carrying amount is disclosed in the note on inventories. Allowance for doubtful trade accounts: An allowance is made for doubtful trade accounts for estimated losses resulting from the subsequent inability of in an impairment of their ability to make payments, additional allowances may be required in future periods. To the extent that it is feasible impairment and uncollectibility is determined individually for each item. In cases where that process is not feasible, a collective evaluation of impairment is performed. At the end of the reporting year, the trade receivables carrying amount approximates the fair value and the carrying amounts might change materially within the next reporting year but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting year. The carrying amount is disclosed in the note on trade and other receivables. Estimated impairment of subsidiary or associate: impracticable to disclose the extent of the possible effects. It is reasonably possible, based on existing knowledge, reporting year affected by the assumption is $80, RELATED PARTY RELATIONSHIPS AND TRANSACTIONS of the reporting entity or of a parent of the reporting entity. (b) An entity is related to the reporting entity if any of the following conditions apply: (i) The entity and the reporting entity are members of the same group; (ii) One entity of a parent of the entity). HAFARY Holdings Limited Annual Report 2014 The ultimate controlling parties are Low Kok Ann and Low See Ching. 95

98 NOTES TO THE FINANCIAL STATEMENTS 30 June RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT D) #3.1 Related companies: There are transactions and arrangements between the reporting entity and members of the group and the effects disclosed as related party transactions and balances below. #3.2 Other related parties: There are transactions and arrangements between the reporting entity and related parties and the effects of these The related party transactions were made on terms equivalent to those that prevail as far as practicable based on market prices. includes the following: 2014 Directors 2013 Other related parties Sale of goods #a (771) (4) (1,199) (879) Rental expense Associate Joint venture 2013 Sale of goods (263) (14) (59) Rental income (214) (91) Interest income (22) Other income (112) (68) Receiving of services Purchase of goods 166 #a. The other related parties and the group have common shareholders. 96

99 NOTES TO THE FINANCIAL STATEMENTS 30 June RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT D) #3.3 Key management compensation: 2014 Group ,684 2, Group 2013 Remuneration of directors of the company 655 1,739 Fees to directors of the company Further information about the remuneration of individual directors is provided in the report on corporate governance. Key management personnel include the directors and those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. The above amounts for key management compensation are for the directors and other key management personnel. #3.4 Other receivables from and other payables to related parties: The trade transactions and the related receivables and payables balances arising from sales and purchases of The movements are as follows: Group 2014 Joint venture 2013 Other receivables (other payables): Balance at beginning of the year net debit Amounts paid in and settlement of liabilities on behalf of company (437) (74) (100) Dividend income Dividends paid in (75) (25) Balance at end of the year net debit HAFARY Holdings Limited Annual Report 2014 Other receivables (Note 24) Other payables (Note 30) (52)

100 NOTES TO THE FINANCIAL STATEMENTS 30 June RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT D) #3.4 Other receivables from and other payables to related parties (cont d): Group 2014 Associate 2013 Other receivable: Balance at beginning of the year Loan to associate 1,269 Interest income 22 Balance at end of the year (Note 24) 1,291 Group 2014 Directors 2013 Other payables: Balance at beginning of the year 2,867 Amounts paid in 549 Interim dividend payable 2,867 Amounts paid out (2,867) Balance at end of the year (Note 30) 549 2,867 Group 2014 Shareholders 2013 Other payables: Balance at beginning of the year 3,568 Amounts paid in 722 Interim dividend payable 3,568 Amounts paid out (3,568) Balance at end of the year (Note 30) 722 3,568 98

101 NOTES TO THE FINANCIAL STATEMENTS 30 June RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONT D) #3.4 Other receivables from and other payables to related parties (cont d): Company 2014 Subsidiaries 2013 Other receivables (other payables): Balance at beginning of the year net debit 30,692 12,558 Amounts paid out and settlement of liabilities on behalf of the subsidiaries 2,085 3,948 Amounts paid in and settlement of liabilities on behalf of the company (23,700) (8,427) Allowance for impairment (5,861) Dividend income 4,940 28,474 Balance at end of the year net debit 14,017 30,692 Other receivables (Note 24) 22,018 30,692 Other payables (Note 30) (8,001) 14,017 30,692 Company 2014 Directors 2013 Other payables: Balance at beginning of the year 2,867 Amounts paid in Interim dividend payable 2,867 Amounts paid out (2,867) Balance at end of the year (Note 30) 2,867 Company 2014 Shareholders 2013 Other payables: Balance at beginning of the year 3,568 Amounts paid in Interim dividend payable 3,568 Amounts paid out (3,568) Balance at end of the year (Note 30) 3,568 HAFARY Holdings Limited Annual Report

102 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INFORMATION BY OPERATING SEGMENTS 4A. INFORMATION ABOUT REPORTABLE SEGMENT PROFIT OR LOSS, ASSETS AND LIABILITIES customers are made as required by FRS 108 Operating Segments. This disclosure standard has no impact on the the basis on which the management reports the primary segment information. They are managed separately because each business requires different strategies. The products of the operating segments comprise ceramic tiles, stone and wood furnishing for residential and commercial properties. The segments and the types of products and services are as follows: General segment includes retail walk-in customers who purchase their requirements from the showrooms or renovation or small property development. The quantities purchased are typically small. construction companies. Others segment relates to investing activities including property development. Inter-segment sales are measured on the basis that the entity actually used to price the transfers. Internal transfer pricing policies of the group are as far as practicable based on market prices. The accounting policies of the The management reporting system evaluates performances based on a number of factors. However, the primary earnings from operations before depreciation, interests and income taxes ( Recurring EBITD ); and (2) operating results before income taxes and other unallocated items ( ORBIT ). 100

103 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INFORMATION BY OPERATING SEGMENTS (CONT D) 4B. PROFIT OR LOSS FROM CONTINUING OPERATIONS AND RECONCILIATIONS General Project Others Unallocated Group 2014: Revenue by segment: Total revenue by segment 67,699 59,804 3, ,987 Inter-segment sales (17,311) (18,521) (2,410) (38,242) Total revenue 50,388 41, ,745 Recurring EBITD 6,782 5,824 1, ,359 Non-recurring EBITD (1,085) (1,085) Gain on disposal of development property Gain on disposal of subsidiary (Note 13) 1,000 1,000 Finance costs (1,482) (302) (1,784) Depreciation expense (1,790) (871) (2,661) associate ORBIT 3,510 4,651 2, ,747 Income tax expense (2,027) 8,720 General Project Others Unallocated Group 2013: Revenue by segment: Total revenue by segment 49,279 49, ,762 Inter-segment sales (1,615) (13,810) (15,425) Total revenue 47,664 35, ,337 Recurring EBITD 8,320 5,190 (25) ,712 Non-recurring EBITD (5,089) (5,089) Gain on disposal of development property 23,762 23,762 Finance costs (1,121) (86) (1,207) Depreciation expense (1,014) (409) (1,423) (1,833) (1,833) associates ORBIT 6,185 4,695 16, ,012 Income tax expense (5,130) 22,882 HAFARY Holdings Limited Annual Report

104 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INFORMATION BY OPERATING SEGMENTS (CONT D) 4C. ASSETS, LIABILITIES AND RECONCILIATIONS General Project Others Unallocated Group 2014: Segment assets 109,981 40,577 3, ,334 Segment liabilities 80,617 27, ,885 Deferred tax liabilities 449 Income tax payable 5,716 Total liabilities 114,050 General Project Others Unallocated Group 2013: Segment assets 95,637 37,329 3, ,987 Segment liabilities 61,070 14,971 1,193 6,435 83,669 Deferred tax liabilities 239 Income tax payable 5,328 Total liabilities 89,236 4D. OTHER MATERIAL ITEMS AND RECONCILIATIONS General Project Others Unallocated Group Impairment of assets, net made/ (reversal): ,020 4,728 Expenditures for non-current assets: ,604 3,989 23, ,851 8,258 9,250 31,

105 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INFORMATION BY OPERATING SEGMENTS (CONT D) 4E. GEOGRAPHICAL INFORMATION 2014 Revenue 2013 Non-Current Assets Singapore 91,296 83,001 63,509 52,284 People s Republic of China 1,063 10,026 Socialist Republic of Vietnam 238 3,496 2,861 Rest of Southeast Asia Total 92,745 83,337 77,031 55,145 Revenues are attributed to countries on the basis of the customer s location, irrespective of the origin of the goods and services. The non-current assets are analysed by the geographical area in which the assets are located. 4F. INFORMATION ABOUT MAJOR CUSTOMERS There was no customer with sale transactions over 10% of the group s revenue during the reporting year (2013: Nil). 5. REVENUE 2014 Group 2013 Sale of goods 87,428 78,081 Amount recognised from installation contracts 4,243 5,030 Rental income Other income Total revenue 92,745 83, INTEREST INCOME 2014 Group 2013 Interest income 23 HAFARY Holdings Limited Annual Report

106 NOTES TO THE FINANCIAL STATEMENTS 30 June OTHER CREDITS AND (OTHER CHARGES) 2014 Group 2013 Compensation income 4 (301) (335) Gain on disposal of development property 85 23,762 (Losses) Gains on disposal of property, plant and equipment (304) 64 Gain on disposal of subsidiary (Note 13) 1,000 Government grant income Insurance compensation received 12 2 Sponsorship income 94 Net 1,042 23,757 Other credits 1,647 24,092 Other charges (605) (335) Net 1,042 23, EMPLOYEE BENEFITS EXPENSE 2014 Group ,303 11,616 1,620 1,477 12,923 13, IMPAIRMENT LOSSES 2014 Group 2013 Allowance for impairment of inventories (Note 23) Allowance for impairment of trade receivables (Note 24) Allowance for impairment of trade receivables, reversal (Note 24) (44) (127) Bad debts recovered trade receivables (2) (1) Bad debts written off other receivables 1 31 Impairment allowance on investment in an associate 4,020 Other assets written off 14 Total impairment losses 344 4,

107 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCE COSTS 2014 Group 2013 Interest expense on: - bank loans 1, bill payables Less: amounts included in the cost of qualifying assets - property, plant and equipment (102) (307) - development property (31) 1,784 1, OTHER EXPENSES The components include the following: 2014 Group 2013 Advertising Bank charges Commission Entertainment and refreshment Hire of equipment and motor vehicles Insurance expense Legal and professional fees Property tax Printing and stationery Rental of premises 2,191 2,400 Repair and maintenance Staff welfare Transportation expense Travelling expense Upkeep of forklifts Upkeep of motor vehicles Utilities Audit fees to the independent auditors of the company Audit fees to the other independent auditors 8 14 Non-audit fees to the independent auditors of the company HAFARY Holdings Limited Annual Report

108 NOTES TO THE FINANCIAL STATEMENTS 30 June INCOME TAX 12A. COMPONENTS OF TAX EXPENSE RECOGNISED IN PROFIT OR LOSS INCLUDE: 2014 Group 2013 Current tax expense: Current tax expense 1,797 5, (412) Subtotal 1,817 5,115 Deferred tax expense: Deferred tax expense Subtotal Total income tax expense 2,027 5, Group ,747 28,012 (635) 1,833 (198) (90) 9,914 29,755 Income tax expense at the above rate 1,685 5,058 Non-deductible items Tax exemptions (158) (152) Effect of different tax rates in different countries (412) Other minor items less than 3% 21 (21) Total income tax expense 2,027 5,130 There are no income tax consequences of dividends to owners of the company. 12B. DEFERRED TAX EXPENSE RECOGNISED IN PROFIT OR LOSS INCLUDES: 2014 Group 2013 Excess of net book values of property, plant and equipment over tax values Provision (63) Total deferred tax expense

109 NOTES TO THE FINANCIAL STATEMENTS 30 June INCOME TAX (CONT D) 12C. DEFERRED TAX BALANCE IN THE STATEMENT OF FINANCIAL POSITION: 2014 Group 2013 Deferred tax liabilities: Excess of net book values of property, plant and equipment over tax values Provision (63) Total deferred tax liabilities It is impracticable to estimate the amount expected to be settled or used within one year. 13. DISPOSAL OF SUBSIDIARY On 10 January 2014, a wholly-owned subsidiary of the company, Hafary Pte Ltd, entered into a sale and purchase agreement to dispose its entire shareholding interest in a wholly-owned subsidiary, Hafary China Pte. Ltd. As at date of sale and purchase agreement, Hafary China Pte. Ltd. holds 45% equity interest in an associate, Hunan Cappuccino Construction Material Co., Limited ( HCCM ), which has been loss-making since its commencement disposal was completed on 13 February The results for the disposed subsidiary for the previous reporting year and for the period from the beginning of the were as follows: Period ended 13/02/2014 Group Year ended 30/06/2013 Revenue Impairment losses (4,020) Payables written back 4 Other expenses (4) (9) Share of loss from Equity-Accounted Associate (1,875) Loss before tax (5,904) Income tax expense Loss after tax before disposal (5,904) Gain on disposal of subsidiary 1,000 Income tax expense Net gain on disposal of subsidiary 1,000 HAFARY Holdings Limited Annual Report 2014 A gain of $999,990 arose on the disposal of Hafary China Pte. Ltd., being the consideration received on disposal less the carrying amount of the subsidiary s net assets. No tax charge or credit arose from this transaction. 107

110 NOTES TO THE FINANCIAL STATEMENTS 30 June DISPOSAL OF SUBSIDIARY (CONT D) The following table summarises the carrying value of the account balances of Hafary China Pte. Ltd. on the date of disposal: Period ended 13/02/2014 Group Year ended 30/06/2013 Trade and other receivables * * Cash and cash equivalents 12 3 Trade and other payables (12) (6,095) Net assets disposed off Gain on disposal of subsidiary 1,000 Total consideration 1,000 Cash proceeds 1,000 statements of the group, were as follows: Period ended 13/02/2014 Group Year ended 30/06/ (22) (7) 108

111 NOTES TO THE FINANCIAL STATEMENTS 30 June EARNINGS PER SHARE The following table illustrates the numerators and denominators used to calculate basic and diluted earnings per share of no par value: 2014 Group ,048 22,328 Number of shares Weighted average number of equity shares 429, ,479 The weighted average number of equity shares refers to shares in circulation during the reporting period. The basic earnings per share ratio is based on the weighted average number of ordinary shares outstanding during each reporting year. Both basic and diluted earnings per share are the same as there are no dilutive ordinary shares equivalents outstanding during each reporting period. 15. DIVIDENDS ON EQUITY SHARES Group and Company Final tax exempt (1-tier) dividends paid of 2.5 cent (2013: 1.5 cent) per share on total number of issued ordinary shares of 429,000,000 (2013: 194,500,000) First interim tax exempt (1-tier) dividends paid of 1.0 cent (2013: 2.5 cent) per share on total number of issued ordinary shares of 429,000,000 (2013: 214,500,000) Second interim tax exempt (1-tier) dividends payable of 1.5 cent per share on total number of issued ordinary shares of 429,000,000 10,725 2,918 4,290 5,362 6,435 Total dividends paid/ payable during the year 15,015 14,715 total of $1,287,000 to be paid to the shareholders after the next annual general meeting. There are no income tax shares in issue at the end of the reporting year and including any new qualifying shares issued up to the date the dividend becomes payable. HAFARY Holdings Limited Annual Report

112 NOTES TO THE FINANCIAL STATEMENTS 30 June PROPERTY, PLANT AND EQUIPMENT Leasehold Properties Plant and Equipment Motor Vehicles Group Total Cost: At 1 July ,025 4,026 2,024 35,075 Additions 20, ,109 Disposals (71) (428) (499) At 30 June ,871 4,739 2,075 56,685 Additions 15,974 2, ,789 Reversal (335) (335) (115) (115) Disposals (503) (375) (878) At 30 June ,395 6,438 2,313 74,146 Accumulated depreciation: At 1 July ,804 1,131 3,505 Depreciation for the year ,423 Disposals (48) (319) (367) At 30 June ,055 2,418 1,088 4,561 Depreciation for the year 1, ,628 Disposals (52) (230) (282) At 30 June ,728 3,012 1,167 6,907 Net book value: At 1 July ,455 2, ,570 At 30 June ,816 2, ,124 At 30 June ,667 3,426 1,146 67,

113 NOTES TO THE FINANCIAL STATEMENTS 30 June PROPERTY, PLANT AND EQUIPMENT (CONT D) Plant and Equipment Motor Vehicles Company Total Cost: At 1 July 2012 and 30 June Addition Disposal (375) (375) At 30 June Accumulated depreciation: At 1 July Depreciation for the year At 30 June Depreciation for the year Disposal (231) (231) At 30 June Net book value: At 1 July At 30 June At 30 June As at the end of the reporting year, the group s leasehold properties with net book value of $57,469,000 (2013: $48,816,000) are mortgaged for bank facilities (Note 28). As at the end of the reporting year, the group s leasehold properties include land and building intended for redevelopment with a cost of $9,174,000. Borrowing costs included in the cost of qualifying assets are as follows: 2014 Group 2013 Borrowing costs capitalised included in additions during the year Accumulated interest capitalised included in the total costs HAFARY Holdings Limited Annual Report

114 NOTES TO THE FINANCIAL STATEMENTS 30 June OTHER ASSET, NON-CURRENT Land use right Group Cost: At 1 July 2012 and 30 June 2013 Addition 4,804 At 30 June ,804 Accumulated depreciation: At 1 July 2012 and 30 June 2013 Depreciation for the year 33 At 30 June Net book value: At 1 July 2012 and 30 June 2013 At 30 June ,771 The land use right is for the land in People s Republic of China for group s inventories warehousing facility use. The land use right commenced on 31 December 2013 and expire on 30 December 2050, which is in 37 years time from the date when the right to use was granted to the group. The land use right is amortised over 37 years, being its right for use. 18. DEVELOPMENT PROPERTY 2014 Group 2013 At cost: At beginning of the year 32,265 Amounts incurred during the year 9,250 Disposal during the year (41,515) At end of the year Borrowing costs capitalised included in the additions during the year 31 Accumulated interest capitalised included in the total costs 814 During the reporting year ended 30 June 2013, the group disposed off the development property at 82 Lorong 23 ownership of the development property were transferred to the purchasers, following the issuance of temporary occupancy permit in December The development property was mortgaged to secure bank loans relating to acquisition and development of the property. During the reporting year ended 30 June 2013, the interest expense capitalised in the development property was at 2.07% per annum of the drawdown loan amount. The security was discharged upon full repayment of the bank loans in November

115 NOTES TO THE FINANCIAL STATEMENTS 30 June INVESTMENTS IN SUBSIDIARIES 2014 Company 2013 Unquoted equity shares at cost 9,239 9,239 Net book value of subsidiaries 29,915 12,495 Analysis of amounts denominated in non-functional currency: United States dollar 8,129 The subsidiaries held by the company and the group are listed below: Name of subsidiaries, country of incorporation, place of operations and principal activities Cost in books of the company Effective percentage of equity held 2014 % 2013 % Hafary Pte Ltd #a 9,239 9, Singapore Importer and dealer of building materials Held through Hafary Pte Ltd: Singapore Distribute and wholesale of building materials Surface Stone Pte. Ltd. #a Singapore Dealer of stones for home furnishing Wood Culture Pte. Ltd. #a Singapore Dealer of wood for home furnishing Hafary Centre Pte. Ltd. #a Singapore Investment holding HAFARY Holdings Limited Annual Report 2014 Hafary China Pte. Ltd. #c 100 Singapore Investment holding Hafary Vietnam Pte. Ltd. #a Singapore Investment holding 113

116 NOTES TO THE FINANCIAL STATEMENTS 30 June INVESTMENTS IN SUBSIDIARIES (CONT D) Name of subsidiaries, country of incorporation, place of operations and principal activities Cost in books of the company Effective percentage of equity held 2014 % 2013 % Held through Hafary Pte Ltd (Cont d): Hafary International Pte. Ltd. #a Singapore Importing and distribution of building materials Marble Trends Pte. Ltd. #a #e (Formerly known as Mediterranean Trends Pte. Ltd.) Singapore Dormant World Furnishing Hub Pte. Ltd. #a #d 46 Singapore (Incorporated on 2 July 2013) Investment holding Held through Hafary International Pte. Ltd.: Foshan Hafary Trading Co., Limited #b 100 People s Republic of China (Incorporated on 16 July 2013) Importing, exporting and distribution of building materials #c During the reporting year, Hafary China Pte. Ltd. was disposed for a cash consideration of $1,000,000 (Note 13). #d The group considers World Furnishing Hub Pte. Ltd. ( WFH ) as a subsidiary as the group has management control over WFH through its indirect interest in WFH, via a director and a substantial shareholder. during the reporting year ended 30 June Consequently, MTPL became a subsidiary. 114

117 NOTES TO THE FINANCIAL STATEMENTS 30 June INVESTMENTS IN ASSOCIATES 2014 Group 2013 Unquoted equity shares at cost 2,061 7,302 Goodwill at cost 758 1,565 Allowance for impairment (4,020) 677 (1,986) 3,496 2,861 Movements in carrying value: At beginning of the year 2,861 5,895 Additions 2,819 Allowance for impairment (4,020) 635 (1,833) At end of the year 3,496 2,861 The cost of investment in associate as at 30 June 2014 is denominated in Vietnamese Dong. For the reporting year ended 30 June 2013, the carrying value of the investment in Hunan Cappuccino Construction HCCM s ability to continue as a going concern. The associates held by the group are listed below: Name of associates, country of incorporation, place of operations and principal activities (and independent auditors) Effective percentage of equity held Hunan Cappuccino Construction Materials Co., Limited ( HCCM ) #a #b 45 People s Republic of China (Disposed on 13 February 2014) Manufacturing and trading of ceramic tiles and building materials (RSM China CPA Firm Shanghai International Division) Viet Ceramics International Joint Stock Company ( VCI ) #b Socialist Republic of Vietnam Importer and dealer of building materials (RSM DTL Auditing Company) 2014 % 2013 % HAFARY Holdings Limited Annual Report 2014 #a Hafary China Pte. Ltd. which held HCCM was disposed during the reporting year (Note 13). Consequently, the group ceased to hold any equity interest in HCCM. 115

118 NOTES TO THE FINANCIAL STATEMENTS 30 June INVESTMENTS IN ASSOCIATES (CONT D) group, is as follows: Name of associate: Assets Liabilities Revenues for the year 2014 VCI 9,540 4,070 13,653 1,296 Name of associates: Assets Liabilities Revenues for the year 2013 HCCM 30,927 28,116 2,060 (4,072) VCI 5,507 1,368 5, INVESTMENTS IN JOINT VENTURES 2014 Group 2013 Unquoted equity shares at cost Movements in carrying value: At beginning of the year 160 Additions Dividends (80) (30) At end of the year Name of joint ventures, country of incorporation, place of operations and principal activities Effective percentage of equity held 2014 % 2013 % Melmer Stoneworks Pte. Ltd. #a Singapore 116

119 NOTES TO THE FINANCIAL STATEMENTS 30 June INVESTMENTS IN JOINT VENTURES (CONT D) held by the group, is as follow: 2014 Group 2013 Assets 1, Liabilities Revenue 2,499 1, OTHER FINANCIAL ASSET Group and Company Balance is made up of: 1,247 Movements during the year: Fair value at beginning of the year Addition 1, Fair value at end of the year (Level 1) 1,247 There are no investment pledged as security for liabilities. Sensitivity analysis for price risk of equity shares is disclosed in Note 33H. 23. INVENTORIES 2014 Group 2013 Goods held for resale 41,356 35,054 HAFARY Holdings Limited Annual Report 2014 Inventories are stated after allowance. Movement in allowance: Balance at beginning of the year 1, Amount written off (26) Balance at end of the year 1,303 1,194 There are no inventories pledged as security for liabilities. 117

120 NOTES TO THE FINANCIAL STATEMENTS 30 June TRADE AND OTHER RECEIVABLES 2014 Group Company 2013 Trade receivables: Outside parties 23,906 22, Less: Allowance for impairment (1,199) (1,385) Subsidiaries (Note 3) 3,563 3,717 Joint venture (Note 3) Associate (Note 3) 238 Other related parties (Note 3) Director (Note 3) 263 Due from customers on work in progress contracts (24A) Subtotal 23,995 22,534 3,566 3,721 Other receivables: Subsidiaries (Note 3) 22,018 36,553 Less: Allowance for impairment (Note 3) (5,861) Joint venture (Note 3) Associate (Note 3) 1,291 Staff loans 9 13 Refundable deposits Receivable from disposal of development property 6,528 Others Subtotal 2,825 7,435 22,273 30,692 Total trade and other receivables 26,820 29,969 25,839 34,413 Movements in above allowance: Balance at beginning of the year 1,385 1,078 5,861 losses (Note 9) ,861 losses (Note 9) (44) (127) Bad debts written off (382) (5,861) Balance at end of the year 1,199 1,385 5,861 24A. DUE FROM CUSTOMERS ON WORK IN PROGRESS CONTRACTS 2014 Group 2013 to date on uncompleted contracts 838 2,207 Less: progress payments received and receivable to date (585) (1,798) Net amount due from contract customers at end of the year

121 NOTES TO THE FINANCIAL STATEMENTS 30 June OTHER ASSETS 2014 Group Company 2013 Advance payments to suppliers 4,023 5,283 Prepayments Deposits to secure services Total other assets 4,270 6, CASH AND CASH EQUIVALENTS 2014 Group Company 2013 Not restricted in use 4,775 9, ,051 Restricted in use #a 82 4,857 9, ,051 #a This is for amount held on behalf of owners of development property (Note 18) to settle utilities expenses. 26A. CASH AND CASH EQUIVALENTS IN THE CONSOLIDATED STATEMENT OF CASH FLOWS: 2014 Group 2013 Amount as shown above 4,857 9,583 Restricted in use (82) end of the year 26B. NON-CASH TRANSACTION: 4,775 9,583 These were acquisitions of certain assets under property, plant and equipment with a total cost of $214,000 (2013: HAFARY Holdings Limited Annual Report

122 NOTES TO THE FINANCIAL STATEMENTS 30 June SHARE CAPITAL Number of shares issued Share capital Group and Company: 000 Ordinary shares of no par value: Balance at 1 July ,500 20,875 Issue of shares pursuant to share placement 20,000 5,880 Share issue expenses (121) Shares split of every 1 ordinary share split into 2 ordinary shares 214,500 Balance at 30 June 2013 and 30 June ,000 26,634 On 27 February 2013, the company issued 20,000,000 new ordinary shares of no par value at an issue price at $0.294 for each ordinary share in a share placement exercise. On 15 May 2013, the company completed share split of every 1 ordinary share in the share capital of the company into 2 ordinary shares. Prior to the share split, the company had an issued and paid-up share capital of $26,634,000 comprising 214,500,000 ordinary shares. Following the completion of share split, the company has an issued and paid-up share capital comprising 429,000,000 ordinary shares. Capital Management: In order to maintain its listing on the Mainboard of the Singapore Exchange, the company, being a listed company The company met the capital requirement on its initial listing on the Mainboard and the rules limiting treasury share purchases mean it will automatically continue to satisfy that requirement, as it did throughout the reporting year. return to owners by pricing the sales commensurately with the level of risk. The management sets the amount of capital to meet its requirements and the risk taken. There were no changes in the approach to capital management necessary or possible in the light of changes in conditions and the risk characteristics of the underlying assets. components of equity (that is, share capital and reserves). cash equivalents. 120

123 NOTES TO THE FINANCIAL STATEMENTS 30 June SHARE CAPITAL (CONT D) 2014 Group 2013 Net debt: 91,642 64,566 Less: Cash and cash equivalents (4,857) (9,583) 86,785 54,983 Total equity 40,284 46, % 117.6% resulted primarily from the increase in new debt. 28. OTHER FINANCIAL LIABILITIES 2014 Group Company 2013 Non-current: Bank loans A (secured) (Note 28A) Bank loans D (secured) (Note 28D) 15,826 16,602 Bank loans E (secured) (Note 28E) 13,314 Bank loans G (secured) (Note 28G) 7,352 Finance leases (Note 28K) Non-current, total 36,941 17, Current: Bank loans A (secured) (Note 28A) 294 1,194 Bank loan B (secured) (Note 28B) 4,000 2,503 Bank loan C (secured) (Note 28C) 1,500 1,500 Bank loans D (secured) (Note 28D) Bank loan E (secured) (Note 28E) 1,145 15,473 Bank loan F (secured) (Note 28F) 3,000 Bank loan H (secured) (Note 28H) 5,000 Bank loan I (secured) (Note 28I) 19,848 Trust receipts and bills payable (Note 28J) 19,006 25,579 Finance leases (Note 24K) Current, total 54,701 47, HAFARY Holdings Limited Annual Report 2014 Total 91,642 64, The non-current portion is repayable as follows: Due within 2 to 5 years 17,948 4, After 5 years 18,993 12,628 Total non-current portion 36,941 17,

124 NOTES TO THE FINANCIAL STATEMENTS 30 June OTHER FINANCIAL LIABILITIES (CONT D) Group Bank loans A (secured) 2.4% 2.32% to 2.39% Bank loan B (secured) 1.96% to 2.12% 1.87% to 2.52% Bank loan C (secured) 2.00% 1.87% Bank loan D (secured) 1.70% to 2.12% 1.85% to 2.30% Bank loans E (secured) 1.94% to 1.95% 2.07% to 2.11% Bank loans F (secured) 2.11% to 2.15% Bank loan G (secured) 1.8% Bank loan H (secured) 2.00% to 2.05% Bank loan I (secured) 1.98% to 2.14% Trust receipts and bills payable 1.43% to 6.00% 1.70% to 3.48% Group Finance leases 1.30% to 2.50% 1.30% to 2.50% 28A. BANK LOANS A (SECURED) These relate to loans for the acquisition of leasehold properties of the group and working capital purpose. The agreements for the bank loans provides among other matters for the following: (i) Repayable by equal monthly instalments over 4 years from September 2011 (2013: over 3 to 4 years from December 2009 and September 2011 respectively). (ii) First legal mortgage over the leasehold properties with carrying values of $2,883,000 (2013: $3,364,000) (Note 16). (iii) Corporate guarantee from the company. 28B. BANK LOAN B (SECURED) This relates to loan for working capital purpose. The agreement for the bank loan provide among other matters for the following: (i) Fully repayable by one lump sum within 6 months (unless rolled over for another interest period up to 6 months). (ii) First legal mortgage over the leasehold property with a carrying value of $1,632,000 (2013: $1,821,000) (Note 16). (iii) Corporate guarantee from the company. 122

125 NOTES TO THE FINANCIAL STATEMENTS 30 June OTHER FINANCIAL LIABILITIES (CONT D) 28C. BANK LOAN C (SECURED) This relates to loan for working capital purpose. The agreement for the bank loan provide among other matters for the following: (i) (ii) Fully repayable by one lump sum within 6 months (unless rolled over for another interest period up to 6 months). Corporate guarantee from the company. 28D. BANK LOANS D (SECURED) These relate to loans for the acquisition of land and construction of the leasehold property at 3 Changi North Street 1, Singapore The agreements for the bank loans provides among other matters for the following: (i) (ii) The land loan is repayable by equal monthly instalments over 20 years from the date of disbursement. The construction loan is repayable by monthly instalments after issuance of the Temporary Occupancy Permit or on 30 June 2013, whichever is earlier. (Note 16). (iv) Corporate guarantees from the company of $19,160,000 (2013: $19,160,000). 28E. BANK LOANS E (SECURED) These relate to loans for the acquisition of land and construction of the leasehold property at 105 Eunos Avenue 3, Singapore The agreement for the term loan provide among other matters for the following: (i) The term loan is repayable by equal monthly instalments over 12 years from the drawdown date of the term loan. (Note 16). (iii) Legal assignment of current and future rental proceeds from the leasehold property and insurance proceeds in respect of the leasehold property. (iv) Corporate guarantees from the company and certain subsidiary of $38,116,000 each. 28F. BANK LOAN F (SECURED) This relates to loan for working capital purpose. HAFARY Holdings Limited Annual Report 2014 The agreement for the bank loan provide among other matters for the following: (i) Fully repayable by one lump sum within 6 months (unless rolled over for another interest period of up to 6 months). (iii) Corporate guarantee from the company of $19,160,

126 NOTES TO THE FINANCIAL STATEMENTS 30 June OTHER FINANCIAL LIABILITIES (CONT D) 28G. BANK LOAN G (SECURED) Industrial Estate, Singapore The agreement for the bank loan provide among other matters for the following: (i) (iii) Fully repayable by one lump sum within 3 months after issuance of the Temporary Occupancy Permit or on 31 July 2016, whichever is earlier. thereon into a 7-storey industrial building for industrial and commercial purposes. Joint and several corporate guarantees from the company and certain subsidiary of $29,901,300 and personal guarantees from a director of $12,350,500 and a substantial shareholder of $16,228, H. BANK LOAN H (SECURED) This relates to loan for working capital purpose. The agreement for the bank loan provide among other matters for the following: (i) Fully repayable by one lump sum within 6 months (unless rolled over for another interest period up to 6 months). (ii) First legal mortgage over the leasehold property with a carrying value of $2,883,000 (Note 16). (iii) Corporate guarantee from the company. 28I. BANK LOAN I (SECURED) These relate to loans for working capital purpose. (i) Fully repayable by one lump sum within 6 months (unless rolled over for another interest period of up to 6 months). (iii) Corporate guarantees from the company and certain subsidiary of $38,116,000 each. 28J. TRUST RECEIPTS AND BILLS PAYABLE These are repayable within 150 to 180 days (2013: 150 to 180 days) and are guaranteed by the company. 124

127 NOTES TO THE FINANCIAL STATEMENTS 30 June OTHER FINANCIAL LIABILITIES (CONT D) 28K. FINANCE LEASES Group: Minimum payments Finance charges Present value 2014 Minimum lease payments payable: Due within one year 155 (17) 138 Due within 2 to 5 years 396 (23) 373 Total 551 (40) Minimum lease payments payable: Due within one year 188 (16) 172 Due within 2 to 5 years 427 (18) 409 Total 615 (34) Company: Minimum payments Finance charges Present value 2014 Minimum lease payments payable: Due within one year 48 (9) 39 Due within 2 to 5 years 181 (16) 165 Total 229 (25) Minimum lease payments payable: Due within one year 66 (5) 61 Due within 2 to 5 years 104 (3) 101 Total 170 (8) 162 HAFARY Holdings Limited Annual Report charge over the leased assets. Other details are as follows: Average lease term in years 4 4 Fixed rate of interest per annum 1.30% to 2.50% 1.30% to 2.50% 125

128 NOTES TO THE FINANCIAL STATEMENTS 30 June PROVISION 2014 Group 2013 Provision for rebates Movements in above provision: Balance at beginning of the year Additions Used (328) (276) Balance at end of the year The group provides for rebates given to customers for settlement made within credit terms. 30. TRADE AND OTHER PAYABLES 2014 Group Company 2013 Trade payables: Outside parties and accrued liabilities 12,094 10, ,551 Joint venture (Note 3) Related party (Note 3) 2 Subtotal 12,378 10, ,551 Other payables: Subsidiaries (Note 3) 8,001 Joint venture (Note 3) 52 Directors (Note 3) 549 2,867 2,867 Shareholders (Note 3) 722 3,568 3,568 Outside parties 1,243 1,292 Subtotal 2,566 7,727 8,001 6,435 Total trade and other payables 14,944 18,183 8,624 7, OTHER LIABILITIES 2014 Group 2013 Advance payments from customers Total other liabilities

129 NOTES TO THE FINANCIAL STATEMENTS 30 June DERIVATIVE FINANCIAL INSTRUMENTS 2014 Group 2013 (Liabilities) Assets - Derivative with (negative) positive fair value: Forward currency contracts non-hedging instruments (104) 197 The movements during the year were as follows: Balance at beginning of the year 197 (43) (301) 240 Balance at end of the year (104) A. FORWARD CURRENCY CONTRACTS These include the gross amount of all notional values for contracts that have not yet been settled or cancelled. The amount of notional value outstanding is not necessarily a measure or indication of market risk, as the exposure of certain contracts may be offset by that of other contracts. Reference currency- United States dollar Reference currency- Euro Maturity Principal Fair value Principal Fair value Fair value Total : Within 8 months 6,750 (104) (104) 6,750 (104) (104) 2013: Within the next 2 months Within 3 to 4 months 3, Within 5 to 6 months 1, , , denominated in the non-functional currencies. The forward currency contracts are put in place in order to hedge the anticipated purchases that will be made in the above currencies over the next reporting year. The forward currency contracts are not traded in an active market. As a result, their fair values are based on valuation and incorporate all factors and assumptions that knowledgeable and willing market participants would consider in setting the price. HAFARY Holdings Limited Annual Report 2014 The fair value of forward currency contracts is based on the current value of the difference between the contractual exchange rates and the market rates at the end of the reporting year. The fair value is regarded as a Level 2 fair value 127

130 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS 33A. CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES reporting year by FRS 39 categories: 2014 Group Company 2013 Financial assets: Cash and bank balances 4,857 9, ,051 Loans and receivables 26,820 29,969 25,839 34,413 1,247 1,247 loss ,924 39,749 27,206 36,464 Financial liabilities: 91,642 64, Trade and other payables at amortised cost 14,944 18,183 8,624 7, ,690 82,749 8,828 8,148 33B. FINANCIAL RISK MANAGEMENT such as credit risk, liquidity risk and market risk comprising interest rate risk, currency risk and price risk exposures. (i) (ii) (v) (vi) Minimise interest rate, currency, credit and market risk for all kinds of transactions. Maximise the use of natural hedge : favouring as much as possible the natural off-setting of sales and costs and payables and receivables denominated in the same currency and therefore put in place hedging strategies only for the excess balance. The same strategy is pursued with regard to interest rate risk. When appropriate, consideration is given to investing in shares or similar instruments. When appropriate, consideration is given to entering into derivatives or any other similar instruments solely for hedging purposes. The Financial Controller monitors the procedures and reports to the audit committee of the board. and the methods used to measure the risks. 128

131 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 33C. FAIR VALUES OF FINANCIAL INSTRUMENTS approximation of the fair value. 33D. CREDIT RISK ON FINANCIAL ASSETS discharge their obligations in full or in a timely manner consist principally of cash balances with banks, cash and the full amount of any loan payable commitment at the end of the reporting year. Credit risk on cash balances is controlled by setting limits on the exposure to individual customers and these are disseminated to the relevant risk on receivables, as the exposure is spread over a large number of counter-parties and customers unless Note 26 discloses the maturity of the cash and cash equivalents balances. As part of the process of setting customer credit limits, different credit terms are used. The average credit period generally granted to trade receivable customers is about 60 days (2013: 60 days). But some customers take a longer period to settle the amounts. (a) Ageing analysis of the age of trade receivable amounts that are past due as at the end of the reporting year but not impaired: (b) 2014 Group 2013 Trade receivables: 61 to 90 days 3,523 3,316 Over 90 days 8,935 7,946 Total 12,458 11,262 Ageing analysis as at the end of the reporting year of trade receivable amounts that are impaired: 2014 Group 2013 HAFARY Holdings Limited Annual Report 2014 Trade receivables: Over 90 days 1,199 1,385 The allowance which is disclosed in the note on trade receivables is based on individual accounts totalling $1,199,000 (2013: $1,385,000) of the group that are determined to be impaired at the end of the reporting year. These are not secured. 129

132 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 33E. LIQUIDITY RISK FINANCIAL LIABILITIES MATURITY ANALYSIS Less than 1 year 2 to 5 years More than 5 years Total Group 2014: Gross borrowings commitments 55,834 20,033 20,814 96, Trade and other payables 14,944 14,944 70,933 20,429 20, , : Gross borrowings commitments 47,668 5,807 14,374 67, Trade and other payables 18,183 18,183 66,039 6,234 14,374 86,647 Less than 1 year 2 to 5 years Company Total 2014: Trade and other payables 8,624 8,624 8, , : Trade and other payables 7,986 7,986 8, ,156 the conditions existing at the report date. Less than 1 year Group Forward currency contracts 8,449 8,

133 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 33E. LIQUIDITY RISK FINANCIAL LIABILITIES MATURITY ANALYSIS (CONT D) counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on to be payable. guarantee amount can be claimed by the other party is used. At the end of the reporting year, no claims on the Less than 1 year 1 to 3 years 3 to 5 years Group Total 2014: Financial guarantee contracts in favour of an associate (Note 3) 2013: Financial guarantee contracts in favour of an associate (Note 3) 452 3,161 3,613 Less than 1 year 1 to 3 years 3 to 5 Years Company Total 2014: Financial guarantee contracts in favour of subsidiaries (Note 3) 54,564 13,981 18,993 87, : Financial guarantee contracts in favour of subsidiaries (Note 3) 46,985 4,342 12,628 63,955 The average credit period taken to settle trade payables is about 60 days (2013: 60 days). The other payables are as they may be available to meet liquidity needs and no further analysis is deemed necessary. In order to meet such HAFARY Holdings Limited Annual Report 2014 Bank facilities: 2014 Group 2013 Undrawn borrowing facilities 76,673 22,832 Unused bank guarantees

134 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 33E. LIQUIDITY RISK FINANCIAL LIABILITIES MATURITY ANALYSIS (CONT D) The undrawn borrowing facilities are available for operating activities and to settle other commitments. Borrowing liabilities and unused bank facilities is provided regularly to management to assist in monitoring the liquidity risk. 33F. INTEREST RATE RISK rate at the end of the reporting year: 2014 Group Company 2013 Financial liabilities: Fixed rates Floating rates 91,131 63,985 91,642 64, The interest rates are disclosed in the respective notes. Sensitivity analysis: 2014 Group 2013 A hypothetical increase in interest rates by 10 basis points with all other variables hypothetical changes in basis points are not based on observable market data (unobservable inputs). 132

135 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 33G. FOREIGN CURRENCY RISK Analysis of amounts denominated in non-functional currency: Group: United States dollar Euro Renminbi Total Financial liabilities: 2014: 10,849 4,703 15,552 Trade and other payables 1, ,221 11,907 5, , : 14,323 5,040 19,363 Trade and other payables ,574 5,400 19,974 exposure to United States dollar and Euro currency risk due to the large value of purchases denominated in these currencies. In this respect, forward currency contracts are entered into for the purpose of hedging the purchases in United States dollar and Euro. Note 32A illustrates the forward currency contracts in place at the end of the reporting year. Sensitivity analysis: 2014 Group 2013 A hypothetical 10% strengthening in the exchange rate of the functional currency against the following currencies with all other variables held constant would United States dollar 1,191 1,457 Euro Renminbi 70 The above table shows sensitivity to a hypothetical 10% variation in the functional currency against the relevant non-functional foreign currencies. The sensitivity rate used is the reasonably possible change in foreign exchange rates. For similar rate weakening of the functional currency against the relevant foreign currencies above, there would be comparable impacts in the opposite direction. HAFARY Holdings Limited Annual Report 2014 The hypothetical changes in exchange rates are not based on observable market data (unobservable inputs). The the end of the reporting year. The analysis above has been carried out on the basis that there are no hedged transactions. In management s opinion, the above sensitivity analysis is unrepresentative of the foreign currency risk as the 133

136 NOTES TO THE FINANCIAL STATEMENTS 30 June FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 33H. EQUITY PRICE RISK There are investments in equity shares or similar instruments. Such investments are exposed to market price risk arising from uncertainties about future values of the investment securities. Sensitivity analysis: 2014 Group 2013 A hypothetical 10% increase in the market index of quoted equity shares would 125 opposite direction. 34. CAPITAL COMMITMENTS Estimated amounts committed at the end of the reporting year for future capital expenditure but not recognised in 2014 Group 2013 Commitments to construct or develop leasehold properties 638 2,948 Commitments to purchase property, plant and equipment OPERATING LEASE PAYMENT COMMITMENTS At the end of the reporting year, the total of future minimum lease payment commitments under non-cancellable operating leases is as follows: 2014 Group 2013 Not later than one year 2,230 1,904 4,719 4,813 15,910 14,266 Rental expense for the year 2,191 2,400 from Jurong Town Corporation are for thirteen to forty-eight years. The lease rental terms, except for leases from clause but the amount of rent increase is not to exceed a certain percentage. 134

137 NOTES TO THE FINANCIAL STATEMENTS 30 June OPERATING LEASE INCOME COMMITMENTS At the end of the reporting year, the total of future minimum lease receivables committed under non-cancellable operating leases are as follows: 2014 Group 2013 Not later than one year 1, , Rental income for the year Operating lease income commitments are for certain leasehold properties. The lease rental income terms are increase is not to exceed a certain percentage. 37. CHANGES AND ADOPTION OF FINANCIAL REPORTING STANDARDS For the current reporting year, the following new or revised Singapore Financial Reporting Standards were adopted. FRS No. Title FRS 1 Amendment to FRS 1 Presentation of Financial Statements (Annual Improvements) FRS 16 Amendment to FRS 16 Property, Plant and Equipment (Annual Improvements) FRS 19 FRS 27 Consolidated and Separate Financial Statements (Amendments to) FRS 32 Amendment to FRS 32 Financial instruments: Presentation (Annual Improvements) FRS 36 FRS 36: Recoverable Amount Disclosures for Non-Financial Assets (relating to goodwill) (early adoption) (*) FRS 107 Amendments to FRS 32 and 107 Titled Offsetting Financial Assets and Financial Liabilities FRS 113 Fair Value Measurements INT FRS 120 Stripping Costs in the Production Phase of a Surface Mine (*) (*) Not relevant to the entity. HAFARY Holdings Limited Annual Report

138 NOTES TO THE FINANCIAL STATEMENTS 30 June FUTURE CHANGES IN FINANCIAL REPORTING STANDARDS The following new or revised Singapore Financial Reporting Standards that have been issued will be effective in future. The transfer to the new or revised standards from the effective dates is not expected to result in material FRS No. Title Effective date for periods beginning on or after FRSs Improvements to FRSs (January 2014) 1 July 2014 FRSs Improvements to FRSs (February 2014) 1 July 2014 FRS 19 1 July 2014 FRS 27 Separate Financial Statements (Revised) 1 January 2014 FRS 28 Investments in Associates and Joint Ventures (Revised) 1 January 2014 FRS 36 FRS 39 Amendments to FRS 36: Recoverable Amount Disclosures for Non-Financial Assets (relating to goodwill) (*) Amendments to FRS 39: Novation of Derivatives and Continuation of Hedge Accounting 1 January January 2014 FRS 110 Consolidated Financial Statements 1 January 2014 FRS 111 Joint Arrangements 1 January 2014 FRS 112 Disclosure of Interests in Other Entities 1 January 2014 FRS 110 Amendments to FRS 110, FRS 111 and FRS January 2014 FRS 114 Regulatory Deferral Accounts (*) 1 January 2016 INT FRS 121 Levies (*) 1 January 2014 (*) Not relevant to the entity. 136

139 APPENDIX 4 VALUATION SUMMARY LETTERS AND VALUATION CERTIFICATES 137

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